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The International Dynamics of R&D and Innovation in the Short and in the Long Run

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Author Info
Laura Bottazzi
Giovanni Peri

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Abstract

In this paper we estimate the dynamic relationship between employment in R&D and generation of knowledge as measured by patent applications across OECD countries. In several recently developed models, known as `idea-based' models of growth, the afore mentioned "idea-generating" process is the engine of productivity growth. Moreover, in real business cycle models technological shocks are an important source of fluctuations. Our empirical strategy is able to test whether knowledge spillovers are strong enough to generate sustained endogenous growth and to estimate the quantitative impact of international knowledge on technological innovation of a country in the short and in the long run. We find that a country's stock of knowledge, its R&D resources and the stock of international knowledge move together in the long run. International knowledge has a very significant impact on innovation. As a consequence, a positive shock to R&D in the US (the largest world innovator) has a significant positive effect on the innovation of all other countries. Such a shock produces its largest effect on domestic and international innovation after five to ten years from its occurrence.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11524.

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Date of creation: Aug 2005
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Handle: RePEc:nbr:nberwo:11524

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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