Utilizing Investment in Fixed Assets and R&D as a Catalyst for Boosting Productivity to Stimulate Economic Growth

Abstract

Investments form the basis for high-quality economic growth by ensuring renewal of production capacities and improvement of technologies and processes, thereby increasing labor productivity. Investment research is key to understanding its impact on the country’s economic advancement and more effective government policymaking to stimulate investment activity. The purpose of this paper is to study the relationship between fixed capital and R&D investments and labor productivity growth, as well as to determine the optimal level of these investments in determining the greatest effect on labor productivity growth. We use a regression model and the least squares method to empirically analyze data for seven countries for the period between 1997 and 2022. We calculate estimated values using SPSS and Python. The results show a certain impact of fixed assets and R&D investments on labor productivity growth. However, the payoff varies across the countries under study. Furthermore, despite its relatively small volumes, investment in R&D brings a greater effect on productivity growth than investment in fixed capital. With other factors remaining constant, the calculated optimums for investments in fixed assets and R&D show maximum points of growth in labor productivity.