IDEAS home Printed from https://ideas.repec.org/a/cuf/journl/y2010v11i1p35-71.html
   My bibliography  Save this article

Output Convergence and the Role of Research and Development

Author

Listed:
  • Mohammad Ashraf

    (Department of Economics, Finance, and Decision Sciences School of Business, The University of North Carolina)

  • Khan A. Mohabbat

    (Department of Economics Northern Illinois University DeKalb, IL)

Abstract

We ask whether failure to control for research and development (R&D) activity in an output convergence regression affects the coefficient estimates of initial output. We focus on output convergence to an economy¡¯s own steady-state growth path using time series regression framework and convergence across economies using panel estimation. We use data for the 30 member countries of the Organization for Economic Co-operation and Development (OECD) and US state-level real per capita output and per capita patents. The results indicate that after controlling for R&D activity the coefficient estimates increase in magnitude (in absolute terms) and in significance levels. Furthermore, the results are not sensitive to the dataset used or the estimation procedure.

Suggested Citation

  • Mohammad Ashraf & Khan A. Mohabbat, 2010. "Output Convergence and the Role of Research and Development," Annals of Economics and Finance, Society for AEF, vol. 11(1), pages 35-71, May.
    • Handle: RePEc:cuf:journl:y:2010:v:11:i:1:p:35-71
    as

    Download full text from publisher

    File URL: http://www.aeconf.net/Articles/May2010/aef110102.pdf
    Download Restriction: no
    File URL: http://down.aefweb.net/AefArticles/aef110102.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jakob Madsen, 2008. "Semi-endogenous versus Schumpeterian growth models: testing the knowledge production function using international data," Journal of Economic Growth, Springer, vol. 13(1), pages 1-26, March.
    2. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    3. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
    4. Marco Alfo & Giovanni Trovato & Robert J. Waldmann, 2008. "Testing for country heterogeneity in growth models using a finite mixture approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(4), pages 487-514.
    5. Coakley, Jerry & Kellard, Neil & Snaith, Stuart, 2005. "The PPP debate: Price matters!," Economics Letters, Elsevier, vol. 88(2), pages 209-213, August.
    6. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    7. Zvi Griliches, 1998. "Patent Statistics as Economic Indicators: A Survey," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 287-343, National Bureau of Economic Research, Inc.
    8. Martin, Philippe & Rogers, Carol Ann, 1997. "Stabilization Policy, Learning-by-Doing, and Economic Growth," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 152-166, April.
    9. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-251, April.
      • Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence," Papers 645, Yale - Economic Growth Center.
      • Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Convergence," Scholarly Articles 3451299, Harvard University Department of Economics.
    10. Geweke, John & Meese, Richard, 1981. "Estimating regression models of finite but unknown order," Journal of Econometrics, Elsevier, vol. 16(1), pages 162-162, May.
    11. Darmot Leahy & J. Peter Neary, 1997. "Veřejná politiky v oblasti výzkumu a vývoje v oligopolním průmyslu [Public Policy Towards R & D in Oligopolistic Industry]," Politická ekonomie, Prague University of Economics and Business, vol. 1997(5), pages 683-698.
    12. Maddison, Angus, 1987. "Growth and Slowdown in Advanced Capitalist Economies: Techniques of Quantitative Assessment," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 649-698, June.
    13. Patrick Sevestre & Laszlo Matyas, 2008. "The Econometrics of Panel Data," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00279977, HAL.
    14. Marios Zachariadis, 2004. "R&D‐induced Growth in the OECD?," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 423-439, August.
    15. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    16. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    17. Marios Zachariadis, 2003. "R&D, innovation, and technological progress: a test of the Schumpeterian framework without scale effects," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(3), pages 566-586, August.
    18. Daniel G. Swaine, 1998. "What do cross-sectional growth regressions tell us about convergence?," Working Papers 98-4, Federal Reserve Bank of Boston.
    19. Williamson, Jeffrey G, 1991. "Productivity and American Leadership: A Review Article," Journal of Economic Literature, American Economic Association, vol. 29(1), pages 51-68, March.
    20. repec:fth:harver:1473 is not listed on IDEAS
    21. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    22. Paul Evans, 1997. "How Fast Do Economies Converge?," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 219-225, May.
    23. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
    24. Joonkyung Ha & Peter Howitt, 2007. "Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 733-774, June.
    25. Evans, Paul & Karras, Georgios, 1996. "Convergence revisited," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 249-265, April.
    26. Beck, Nathaniel & Katz, Jonathan N., 1995. "What To Do (and Not to Do) with Time-Series Cross-Section Data," American Political Science Review, Cambridge University Press, vol. 89(3), pages 634-647, September.
    27. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
    28. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 309-362, July.
    29. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    30. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-1238, December.
    31. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    32. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(2), pages 385-406, June.
    33. Walter Nonneman & Patrick Vanhoudt, 1996. "A Further Augmentation of the Solow Model and the Empirics of Economic Growth for OECD Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 943-953.
    34. John B. Hall & Udo Ludwig, 2006. "Economic convergence across German regions in light of empirical findings," Cambridge Journal of Economics, Oxford University Press, vol. 30(6), pages 941-953, November.
    35. Crihfield, John B. & Giertz, J. Fred & Mehta, Shekhar, 1995. "Economic growth in the American states: The end of convergence?," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(35), pages 551-577.
    36. László Mátyás & Patrick Sevestre (ed.), 2008. "The Econometrics of Panel Data," Advanced Studies in Theoretical and Applied Econometrics, Springer, number 978-3-540-75892-1, July-Dece.
    37. Abigail Barr, 1995. "The missing factor: entrepreneurial networks, enterprises and economic growth in Ghana," CSAE Working Paper Series 1995-11, Centre for the Study of African Economies, University of Oxford.
    38. Baumol, William J. & Nelson, Richard R. & Wolff, Edward N. (ed.), 1994. "Convergence of Productivity: Cross-National Studies and Historical Evidence," OUP Catalogue, Oxford University Press, number 9780195083903, Decembrie.
    39. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-421, May.
    40. Folster, Stefan & Trofimov, Georgi, 1997. "Industry evolution and R&D externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1727-1746, August.
    41. Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 1127-1170.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Chan, 2012. "A very preliminary survey on growth and development," MPRA Paper 39037, University Library of Munich, Germany.
    2. Kunting Chen, 2012. "Analysis of the Great Divergence under a Unified Endogenous Growth Model," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 317-353, November.
    3. Felipa de Mello-Sampayo & Sofia de Sousa-Vale & Francisco Camoes, 2015. "Substitutability Between Drugs, Innovation, and Fiscal Policy in the Pharmaceutical Industry," Annals of Economics and Finance, Society for AEF, vol. 16(2), pages 273-289, November.
    4. Rath, Badri Narayan & Panda, Bibhudutta & Akram, Vaseem, 2023. "Convergence and determinants of ICT development in case of emerging market economies," Telecommunications Policy, Elsevier, vol. 47(2).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    2. Stephen Dobson & Carlyn Ramlogan & Eric Strobl, 2006. "Why Do Rates Of Β‐Convergence Differ? A Meta‐Regression Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(2), pages 153-173, May.
    3. Peter Mulder & Henri Groot, 2007. "Sectoral Energy- and Labour-Productivity Convergence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(1), pages 85-112, January.
    4. Massimiliano Affinito, 2011. "Convergence clubs, the euro-area rank and the relationship between banking and real convergence," Temi di discussione (Economic working papers) 809, Bank of Italy, Economic Research and International Relations Area.
    5. ?gel de la Fuente, "undated". "Convergence Across Countries And Regions: Theory And Empirics," UFAE and IAE Working Papers 447.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    6. Miketa, Asami & Mulder, Peter, 2005. "Energy productivity across developed and developing countries in 10 manufacturing sectors: Patterns of growth and convergence," Energy Economics, Elsevier, vol. 27(3), pages 429-453, May.
    7. Jones, Charles I, 1997. "Convergence Revisited," Journal of Economic Growth, Springer, vol. 2(2), pages 131-153, July.
    8. Bayraktar-Sağlam, Bahar & Yetkiner, Hakan, 2014. "A Romerian contribution to the empirics of economic growth," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 257-272.
    9. Eftychia Tsanana & Constantinos Katrakilidis, 2014. "Do Balkan economies catch up with EU? New evidence from panel unit root analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 641-662, November.
    10. Bos, J.W.B. & Economidou, C. & Koetter, M., 2010. "Technology clubs, R&D and growth patterns: Evidence from EU manufacturing," European Economic Review, Elsevier, vol. 54(1), pages 60-79, January.
    11. Juan Brida & Nicolás Garrido & Francesco Mureddu, 2014. "Italian economic dualism and convergence clubs at regional level," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(1), pages 439-456, January.
    12. Lehmann, Hartmut & Silvagni, Maria Giulia, 2013. "Is There Convergence of Russia's Regions? Exploring the Empirical Evidence: 1995–2010," IZA Discussion Papers 7603, Institute of Labor Economics (IZA).
    13. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796, Elsevier.
    14. Nicholas Vasilakos & Nikolay Zubanov, 2009. "Income Convergence and R&D Intensity in OECD Manufacturing Industries: A Panel Study," Discussion Papers 09-09, Department of Economics, University of Birmingham.
    15. Miron, Dumitru & Dima, Alina & Paun, Cristian, 2009. "A model for assessing Romania's real convergence based on distances and clusters methods," MPRA Paper 31410, University Library of Munich, Germany.
    16. Matthew Higgins & Daniel Levy & Andrew T. Young, 2003. "Growth and Convergence across the US: Evidence from County-Level Data," Working Papers 2003-03, Bar-Ilan University, Department of Economics.
    17. Celine Bonnefond, 2014. "Growth Dynamics And Conditional Convergence Among Chinese Provinces: A Panel Data Investigation Using System Gmm Estimator," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(4), pages 1-25, December.
    18. Amélie Charles & Olivier Darne & Jean-François Hoarau, 2012. "Convergence of real per capita GDP within COMESA countries: A panel unit root evidence," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 49(1), pages 53-71, August.
    19. Middendorf Torge, 2006. "Human Capital and Economic Growth in OECD Countries," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(6), pages 670-686, December.
    20. Simplice A. Asongu, 2013. "African Stock Market Performance Dynamics: A Multidimensional Convergence Assessment," Journal of African Business, Taylor & Francis Journals, vol. 14(3), pages 186-201, December.

    More about this item

    Keywords

    Output convergence; R&D; Omitted variable bias; Panel estimation; Panel unit root tests;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2010:v:11:i:1:p:35-71. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.