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Measuring the "Ideas" Production Function: Evidence from International Patent Output

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  • Michael E. Porter
  • Scott Stern
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    Abstract

    This paper estimates the parameters of the ideas' production function central to recent models of economic growth. We do so by evaluating the determinants of international' patenting rates across the OECD, where an international patent is one granted by the U.S. patent office to a foreign establishment. Taking advantage of variation in the flow of ideas produced by different countries over time, we provide evidence for three main findings. First, at the level of the production of international patents, country-level R&D productivity increases proportionally with the stock of ideas already discovered, a key parametric restriction associated with the Romer model of ideas-driven growth (Romer, 1990; Jones, 1995). Second, we find that ideas productivity in a given country is constant or declining in the worldwide stock of ideas. Ideas production by other countries raises the bar for producing new-to-the-world technology domestically, outweighing the positive effects of international knowledge spillovers. Finally, ideas productivity is concave in the size of the R&D workforce and the linkage between ideas production and overall productivity growth is small. These results suggest that while the parametric restrictions required to generate endogenous technological change may be satisfied for individual economies, the growth rate associated with such effects may be modest. There seems to be a gap between the the sustained production of ideas by advanced economies and the ability to translate ideas into measured productivity growth.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7891.

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    Date of creation: Sep 2000
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    Handle: RePEc:nbr:nberwo:7891

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    1. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
    2. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
    3. Eaton, Jonathan & Kortum, Samuel, 1996. "Trade in ideas Patenting and productivity in the OECD," Journal of International Economics, Elsevier, vol. 40(3-4), pages 251-278, May.
    4. 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.
    5. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
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    7. Keller, Wolfgang, 2002. " Trade and the Transmission of Technology," Journal of Economic Growth, Springer, vol. 7(1), pages 5-24, March.
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    9. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
    10. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
    11. David T. Coe & Elhanan Helpman, 1993. "International R&D Spillovers," NBER Working Papers 4444, National Bureau of Economic Research, Inc.
    12. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
    13. Chihwa Kao & Min-Hsien Chiang, 1997. "On the Estimation and Inference of a Cointegrated Regression in Panel Data," Econometrics 9703001, EconWPA.
    14. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
    15. Zvi Griliches, 1984. "R & D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1, May.
    16. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
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    22. repec:fth:harver:1473 is not listed on IDEAS
    23. Bental, Benjamin & Peled, Dan, 1996. "The Accumulation of Wealth and the Cyclical Generation of New Technologies: A Search Theoretic Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 687-718, August.
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