This study analyses the economic impacts of R&D inputs. In the model employed, sectoral TFP growth is determined by the direct impact of R&D inputs on the volume of production via the improvement in the quality of production as well as by the diffusion of new technology through purchases of investment goods both domestically and from abroad. The effects of increases in R&D inputs and productivity are transmitted to domestic demand mainly through wage and private consumption growth and to exports via improved export competitiveness. Model simulations show that the impact on competitiveness and export volume dominates the overall effect on GDP growth because an increase in R&D inputs boosts productivity in industry the most. An increase in the R&D intensity of the economy also leads to positive employment effects. Looking at the effects of sectoral R&D inputs, the paper shows that the machinery industry, data-processing services and the electronic equipment industry are the most effective in terms of their impact on national productivity. Raising R&D inputs in the forest industry and the machinery industry yield the greatest impact on GDP, employment, net exports and public sector tax revenue.
