Essays on R&D and Growth

Abstract: The purpose of this study is to analyze some aspects of the relationship between R&D and economic growth. In Chapter 2 we analyze how costly imitation may be incorporated into an R&D-driven endogenous growth model. In the model, optimizing firms allocate resources to innovation or imitation. Thus, the extent of technology diffusion through imitation is endogenously determined. Costs of imitation tend to limit the extent of technology diffusion in the economy. Furthermore, firms engage R&D-resources in imitation which, in contrast to innovation, only has a private return. The analysis shows that the growth rate will be tied to the labor supply per firm. Hence, we find no direct scale effects with large countries growing faster than small countries. In Chapter 3 we study empirically how R&D affects growth in a cross-section of 62 countries. More specifically we study whether the absolute amount of R&D conducted or the R&D-intensity in terms of GDP or population affects the growth rate. We find no scale effects from R&D, i.e. the absolute amount of R&D conducted does not affect the growth rate. The R&D-intensity variables have a significant impact on the growth rate. Furthermore, we introduce the possibility of international technology diffusion through R&D into the analysis. In the case of poorer countries, R&D seems to facilitate international technology diffusion. Chapter 4 examines whether R&D affects productivity growth within the manufacturing sector in six large OECD-countries. We study effects from R&D conducted both within the industry and in other industries in the manufacturing sector. We also study the extent of international spillovers from R&D. We use both a traditional productivity approach and an endogenous growth approach to the accumulation of R&D stocks in order to study the effects of R&D on productivity growth. We find effects from domestic and foreign within-industry R&D in the endogenous growth approach, but find no evidence of inter-industry spillovers from R&D. In Chapter 5 we continue the analysis from chapter 4. Specifically, we study whether R&D embodied in input-goods may affect productivity growth. Both domestically produced input-goods and foreign produced input-goods are included in the analysis. Furthermore, we study whether R&D may be transferred through direct foreign investment (DFI) and hence affect productivity growth. Based on the endogenous growth approach, we find that R&D transferred through DFI affects productivity growth, but no effect from R&D embodied in input-goods. Chapter 6 studies whether higher per capita incomes leads to more R&D per capita within a group of OECD-countries. The results shows that the income-elasticity of R&D is very high. We also analyze the importance of foreign demand on R&D expenditures and find a positive and significant effect. Econometric tests suggest that there may exist a two-way relationship between GDP per capita and R&D. Consequently, we estimate a GDP equation and an R&D equation with instrumental variable methods. The results still show a high income-elasticity of R&D expenditures. The instrumental variable estimation however suggests that studying the effect of R&D on productivity with ordinary least squares may seriously overestimate these effects.