The impact of R&D investment on economic growth : evidence from Panama using elastic net and bootstrap techniques

This study analyzes the impact of research and development (R&D) investment on economic growth in Panama, an emerging economy with structural challenges in its innovation system. Using a multivariate econometric approach that included elastic net regularization and fixed-effect panel data estimation, the analysis incorporated key explanatory variables such as public education expenditure, inflation, infrastructure investment, population growth, and exports. The results indicated that both R&D and education spending have a positive and statistically significant effect on GDP growth, while inflation has a negative impact and exports show no significant effect. To ensure robustness, the study applied the augmented Dickey-Fuller test for stationarity, nonparametric bootstrapping (1000 replications), and multiple diagnostic tests, including RMSE, adjusted R2, Durbin-Watson statistic, and White's test. Scenario-based projections suggest that gradual and sustained increases in R&D investment, supported by stronger institutional coordination and absorptive capacity, could enhance Panama's long-term productivity and innovation outcomes. The findings underscore that improving R&D funding alone is not sufficient; effective governance and coherent science, technology, and innovation (STI) policies are essential. This research contributes empirical evidence to a relatively underexplored area in the development literature and offers strategic insights for policymakers seeking to build more integrated and sustainable STI ecosystems in emerging economies.