The Importance of innovation for the economic performance of industrialized countries has been largely stressed recently by the theoretical and empirical literature. Very few studies have carefully considered the determinants of European innovation, the productivity of its R&D and the existence of knowledge spillovers across regional boundaries. Here we develop a model which, emphasizing "the demand pull" as a key exogenous determinant of long-run innovation across regions, allows us to estimate the returns to regional R&D as a generator of innovation. We find that most of the cross-regional differences in innovation rates can be explained by own R&D, even after correcting for the endogeneity bias. Moreover, significant spillovers are found among geographically close regions, especially if they are technologically similar.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2279.
Find related papers by JEL classification: O3 - Economic Development, Technological Change, and Growth - - Technological Change R0 - Urban, Rural, and Regional Economics - - General R1 - Urban, Rural, and Regional Economics - - General Regional Economics
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