Towards an Efficient Use of R&D – Accounting for Heterogeneity in the OECD
AbstractExpenditures devoted to research and development (R&D) are scarce and thus need to be used as efficiently as possible given the financial constraints countries are facing. This paper assesses the relative efficiency of R&D expenditures for 26 OECD member countries and 2 non-member countries. As countries differ in their national innovation systems and states of economic development and industrialization, e.g. transition economies in Eastern Europe vs. Asian countries vs. Anglo-Saxon countries, the measurement of R&D efficiency needs to consider differences in the technology of knowledge production. The existing empirical literature on R&D efficiency mainly builds on a homogeneous technology frontier neglecting the importance to account for country-specific heterogeneity. This paper models technological differences in knowledge production among countries using a stochastic frontier model for panel data. Applying a latent class model for SFA, we find empirical evidence for two technological classes, a `capital-intensive' and a `labor-intensive' one. Assuming a common knowledge production technology, as has been done so far in the empirical literature, thus results in biased efficiency estimates.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9345.
Date of creation: Feb 2013
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Find related papers by JEL classification:
- C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-CSE-2013-04-13 (Economics of Strategic Management)
- NEP-EFF-2013-04-13 (Efficiency & Productivity)
- NEP-INO-2013-04-13 (Innovation)
- NEP-KNM-2013-04-13 (Knowledge Management & Knowledge Economy)
- NEP-SBM-2013-04-13 (Small Business Management)
- NEP-TRA-2013-04-13 (Transition Economics)
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