Poor countries invest far less in research and development (R&D) as a share of their GDP than rich countries. Even middle income countries often invest well under 0.5%, compared to 3% and above in advanced countries.
This fact poses a profound development mystery, and at the surface, suggests huge missed opportunities. Estimates of the social rates of return to R&D - often above 40% - in advanced countries are so high, as to justify levels of investment in developing countries that are multiples greater than those actually found. The case appears to be particularly strong for poor countries, where R&D is essential to the "absorptive'' or "national learning'' capacity that is needed to exploit technological advance originating from rich countries.