Most of the empirical studies assessing the R&D-productivity relationship at the country level fail to consider the possible simultaneity of these variables. Using a 65-country panel for the period between 1965 and 2005, this paper studies the relationship between R&D and productivity using several R&D indicators. We establish that per capita R&D expenditure is strongly exogenous to productivity. This result allows us to develop a further argument that demonstrates the high social returns to R&D spending. Our estimates also indicate that a 10% increase in R&D per capita generates an average increase of about 1.6% in the long-run TFP.
Bibliographical noteFunding Information:
For valuable comments and suggestions, we thank Roberto Álvarez, Martin Bell, José Miguel Benavente, Mauricio Calani, Rómulo Chumacero and Gustavo Leyva, as well as the participants at the internal Central Bank of Chile seminar and the SECHI 2007 meeting of economists. We are especially grateful to two anonymous referees whose comments greatly improved the final version of our paper, and to Daniel Lederman who generously shared his data with us. Claudio Bravo-Ortega thanks financial support from Fondecyt Grants Numbers 1061137 and 1085027. The usual disclaimer applies.
- Country panel
- Economic growth