R&D and Productivity Growth: Panel Data Analysis of 16 OECD Countries

This study investigates the long-term effects of various types of R&D on multi-factor productivity growth, which are the spillover effects of R&D activities. Econometric estimates are conducted on a panel of 16 OECD countries, over the period 1980-98. All results are averages over countries and time, and little can be said about country specificities. Major results are as follows: an increase of 1 per cent in business R&D generates 0.13 per cent in productivity growth. The effect is larger in countries that are intensive in business R&D, and in countries where the share of defence-related government funding is lower; a 1 per cent increase in foreign R&D generates 0.46 per cent in productivity growth, and the effect is larger in countries intensive in business R&D; 1 per cent more in public R&D generates 0.17 per cent in productivity growth. The effect is larger in countries where the share of universities (as opposed to government labs) is higher, in countries where the share of defence R&D is lower, and in countries which are intensive in business R&D.