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R&D in WorldScan

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Author Info
Sabine Visser ()
Abstract

This memorandum analyses the R&D version of WorldScan, the CGE model for the world economy of the CPB Netherlands Bureau for Economic Policy Analysis. We check whether the effect of R&D on total factor productivity (TFP) as modelled in WorldScan is consistent with the empirical estimates used for the calibration of the model.
We find that the model deviates from these empirical estimates in two ways: i) the effect of R&D in WorldScan differs considerably over countries and sectors. Some validation for this sectoral pattern is found in the empirical literature; and ii) in WorldScan, R&D not only generates spillovers, but is also treated as a production factor. There is thus a potential for double-counting the effects of private R&D. We find that this risk is only partly realized.
In addition, we have considered the effectiveness of an R&D tax credit in WorldScan and find that such a tax credit raises both R&D expenditures and welfare. The degree of effectiveness of the tax credit in raising R&D expenditures is broadly consistent with the empirical literature: €1 extra R&D credit raises total R&D expenditures by an equal amount.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Memoranda with number 189.

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Date of creation: Oct 2007
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Handle: RePEc:cpb:memodm:189

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Related research
Keywords: R&D; applied general equilibrium models; international economic policy analysis;

Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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  1. Diao, Xinshen & Roe, Terry & Yeldan, Erinc, 1999. "Strategic policies and growth: an applied model of R&D-driven endogenous growth," Journal of Development Economics, Elsevier, vol. 60(2), pages 343-380, December. [Downloadable!] (restricted)
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  2. Bernstein, Jeffrey I. & Mamuneas, Theofanis P., 2006. "R&D depreciation, stocks, user costs and productivity growth for US R&D intensive industries," Structural Change and Economic Dynamics, Elsevier, vol. 17(1), pages 70-98, January. [Downloadable!] (restricted)
  3. Meister, C. & Verspagen, B., 2004. "European Productivity Gaps: Is R&D the solution?," ECIS Working Papers 04.03, Eindhoven Centre for Innovation Studies, Eindhoven University of Technology. [Downloadable!]
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  4. Wolfgang Keller, 2002. "Geographic Localization of International Technology Diffusion," American Economic Review, American Economic Association, vol. 92(1), pages 120-142, March. [Downloadable!]
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  5. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. van Bergeijk, Peter A. G. & van Hagen, Gilbert H. A. & de Mooij, Ruud A. & van Sinderen, Jarig, 1997. "Endogenizing technological progress: The MESEMET Model," Economic Modelling, Elsevier, vol. 14(3), pages 341-367, July. [Downloadable!] (restricted)
  7. Hall, Bronwyn & Van Reenen, John, 2000. "How effective are fiscal incentives for R&D? A review of the evidence," Research Policy, Elsevier, vol. 29(4-5), pages 449-469, April. [Downloadable!] (restricted)
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  10. Cincera, Michele, 2005. "Firms' Productivity Growth and R&D Spillovers: An Analysis of Alternative Technological Proximity Measures," CEPR Discussion Papers 4894, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Christine Greenhalgh & Mark Longland, 2002. "Running to Stand Still? - Intellectual Property and Value Added in Innovating Firms," Economics Series Working Papers 134, University of Oxford, Department of Economics. [Downloadable!]
  12. Nadiri, M.I., 1993. "Innovations and Technological Spillovers," Working Papers 93-31, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
  13. Schankerman, Mark, 1981. "The Effects of Double-Counting and Expensing on the Measured Returns to R&D," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 454-58, August. [Downloadable!] (restricted)
  14. Bart Verspagen, 1997. "Estimating international technology spillovers using technology flow matrices," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 226-248, 06. [Downloadable!] (restricted)
  15. Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2007. "What Happened to the Knowledge Economy? ICT, Intangible Investment and Britain's Productivity Record Revisited," Working Papers 603, Queen Mary, University of London, Department of Economics. [Downloadable!]
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  16. Dominique Guellec & Bruno Van Pottelsberghe, 2000. "The Impact of Public R&D Expenditure on Business R&D," OECD Science, Technology and Industry Working Papers 2000/4, OECD, Directorate for Science, Technology and Industry. [Downloadable!]
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  17. Sean M. Dougherty & Robert Inklaar & Robert H. McGuckin & Bart van Ark, 2007. "International Comparisons of R&D Expenditure: Does an R&D PPP Make a Difference?," NBER Working Papers 12829, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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