Israel has consistently ranked near the top of international charts for research and development (R&D) expenditure as a percentage of GDP, often exceeding 5%. This massive commitment to innovation is supported by a dense network of startups, research institutions, and multinational R&D centers. High enrolment in tertiary education and a strong emphasis on STEM (science, technology, engineering, and mathematics) subjects have created a highly skilled, adaptable workforce.
Over the past few decades, Israel’s transition into a high-income, technology-driven economy has been remarkably swift. A combination of supportive public policies, such as the Israel Innovation Authority's grants, and robust private venture capital has spurred high levels of investment in both intellectual and physical capital. Exports of high-tech services and advanced manufacturing now form the backbone of the country's trade balance.
Investment in R&D has been a cornerstone of structural change and sustained productivity gains. By fostering innovation and technological progress, R&D spending improves the efficiency of production processes and creates high-value-added products. Economists emphasize that while public seed funding reduces initial risk, the long-term expansion of the productive capacity is sustained by private enterprises translating these innovations into global commercial successes.
Extract D states: "Investment in R&D has been a cornerstone of structural change and sustained productivity gains."
With the help of a diagram, explain how investment in research and development (R&D) can help to increase the long-run growth rate of an economy.
327 exam-style questions on AQA A Level Economics 2.3 Economic performance, covering 2.3.1 Economic growth and the economic cycle, 2.3.2 Employment and unemployment, 2.3.3 Inflation and deflation, and 2.3.4 Possible conflicts between macroeconomic policy objectives. Each one has a worked solution and a mark scheme showing where the marks go.