IDEAS home Printed from https://ideas.repec.org/p/ssb/dispap/927.html
   My bibliography  Save this paper

Modeling R&D spillovers to productivity. The effects of tax policy

Author

Listed:

Abstract

We study the role of R&D spillovers when modelling total factor productivity (TFP) by industry. Using Norwegian industry level data, we find that for many industries there are significant spillovers from both domestic sources and from technological change at the international frontier. International spillovers contributed with 38 per cent to the total growth in TFP from 1982 to 2018 while domestic channels contributed with 44 per cent. The remaining 18 per cent is due to interaction effects. We include these channels into a large-scale econometric model of the Norwegian economy to study how R&D policies can promote economic growth. We find that current R&D policies in the form of generous tax deductions have increased growth in productivity and income in the Norwegian economy. The simulation results lend some support to the view that there are fiscal policy instruments that may have very large multipliers, even in the case of a fully financed policy change.

Suggested Citation

  • Thomas von Brasch & Ådne Cappelen & Håvard Hungnes & Terje Skjerpen, 2020. "Modeling R&D spillovers to productivity. The effects of tax policy," Discussion Papers 927, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:927
    as

    Download full text from publisher

    File URL: https://www.ssb.no/en/forskning/discussion-papers/_attachment/419419?_ts=171bad3e488
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ioannis Bournakis & Dimitris Christopoulos & Sushanta Mallick, 2018. "Knowledge Spillovers And Output Per Worker: An Industry‐Level Analysis For Oecd Countries," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1028-1046, April.
    2. Biorn, Erik & Jensen, Morten & Reymert, Morten, 1987. "KVARTS - a quarterly model of the Norwegian economy," Economic Modelling, Elsevier, vol. 4(1), pages 77-109, January.
    3. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1033-1082, Elsevier.
    4. Mairesse, Jacques & Mohnen, Pierre, 2010. "Using Innovation Surveys for Econometric Analysis," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1129-1155, Elsevier.
    5. Pål Boug & Andreas Fagereng, 2010. "Exchange rate volatility and export performance: a cointegrated VAR approach," Applied Economics, Taylor & Francis Journals, vol. 42(7), pages 851-864.
    6. Barth, Nini & Cappelen, Ådne & Skjerpen, Terje & Todsen, Steinar & Åbyholm, Thom, 2016. "Expected service lives and depreciation profiles for capital assets: Evidence based on a survey of Norwegian firms," Journal of Economic and Social Measurement, IOS Press, issue 4, pages 329-369.
    7. Francesco Di Comite & dArtis Kancs, 2015. "Macro-Economic Models for R&D and Innovation Policies," JRC Working Papers on Corporate R&D and Innovation 2015-03, Joint Research Centre.
    8. John Dagsvik & Tom Kornstad & Terje Skjerpen, 2013. "Labor force participation and the discouraged worker effect," Empirical Economics, Springer, vol. 45(1), pages 401-433, August.
    9. Eilev Jansen, 2013. "Wealth effects on consumption in financial crises: the case of Norway," Empirical Economics, Springer, vol. 45(2), pages 873-904, October.
    10. John K. Dagsvik & Steinar StrØm, 2006. "Sectoral labour supply, choice restrictions and functional form," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 803-826, September.
    11. Coe, David T. & Helpman, Elhanan & Hoffmaister, Alexander W., 2009. "International R&D spillovers and institutions," European Economic Review, Elsevier, vol. 53(7), pages 723-741, October.
    12. Pål Boug & Ådne Cappelen & Anders Rygh Swensen, 2017. "Inflation Dynamics in a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(4), pages 1010-1039, October.
    13. Bronwyn H. Hall, 2010. "Measuring the Returns to R&D: The Depreciation Problem," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 341-381, National Bureau of Economic Research, Inc.
    14. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    15. J. B. Taylor & Harald Uhlig (ed.), 2016. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 2, number 2.
    16. Cappelen, Ådne & Raknerud, Arvid & Rybalka, Marina, 2012. "The effects of R&D tax credits on patenting and innovations," Research Policy, Elsevier, vol. 41(2), pages 334-345.
    17. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    18. Bardsen, Gunnar & Eitrheim, Oyvind & Jansen, Eilev S. & Nymoen, Ragnar, 2005. "The Econometrics of Macroeconomic Modelling," OUP Catalogue, Oxford University Press, number 9780199246502.
    19. Sandmo, Agnar, 1974. "Investment Incentives and the Corporate Income Tax," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 287-302, Part I, M.
    20. Bye Brita & Faehn Taran & Grünfeld Leo A., 2011. "Growth and Innovation Policy in a Small, Open Economy: Should You Stimulate Domestic R&D or Exports?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-41, July.
    21. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    22. Ådne Cappelen & Erik Fjærli & Frank Foyn & Torbjørn Hægeland & Jarle Møen & Arvid Raknerud & Marina Rybalka, 2010. "Evaluation of the Norwegian R&D tax credit scheme," Discussion Papers 640, Statistics Norway, Research Department.
    23. Andreas Benedictow & Pål Boug, 2013. "Trade liberalisation and exchange rate pass-through: the case of textiles and wearing apparels," Empirical Economics, Springer, vol. 45(2), pages 757-788, October.
    24. Håvard Hungnes, 2011. "A demand system for input factors when there are technological changes in production," Empirical Economics, Springer, vol. 40(3), pages 581-600, May.
    25. Vasco M. Carvalho & Alireza Tahbaz-Salehi, 2019. "Production Networks: A Primer," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 635-663, August.
    26. Jones, C.I., 2016. "The Facts of Economic Growth," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 3-69, Elsevier.
    27. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2013. "Exchange Rate Pass-through in a Small Open Economy: the Importance of the Distribution Sector," Open Economies Review, Springer, vol. 24(5), pages 853-879, November.
    28. Andreas Benedictow & Pål Boug, 2017. "Calculating the real return on a sovereign wealth fund," Canadian Journal of Economics, Canadian Economics Association, vol. 50(2), pages 571-594, May.
    29. repec:adr:anecst:y:2005:i:79-80:p:14 is not listed on IDEAS
    30. Brita Bye & Taran Fæhn, 2012. "Innovative and absorptive capacity effects of education in a small open economy," Discussion Papers 694, Statistics Norway, Research Department.
    31. Andreas Benedictow & Pål Boug, 2017. "Calculating the real return on a sovereign wealth fund," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(2), pages 571-594, May.
    32. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    33. Giovanni Mandras & Andrea Conte & Simone Salotti, 2019. "The RHOMOLO-IO modelling framework: a flexible Input-Output tool for policy analysis," JRC Working Papers on Territorial Modelling and Analysis 2019-06, Joint Research Centre.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. von Brasch, T. & Cappelen, Å. & Hungnes, H. & Skjerpen, T., 2021. "Modeling R&D spillovers to productivity: The effects of tax credits," Economic Modelling, Elsevier, vol. 101(C).
    2. Boug, Pål & Brasch, Thomas von & Cappelen, Ådne & Hammersland, Roger & Hungnes, Håvard & Kolsrud, Dag & Skretting, Julia & Strøm, Birger & Vigtel, Trond C., 2023. "Fiscal policy, macroeconomic performance and industry structure in a small open economy," Journal of Macroeconomics, Elsevier, vol. 76(C).
    3. Thomas von Brasch & Marit Linnea Gjelsvik & Victoria Sparrman, 2018. "Deunionization and job polarization – a macroeconomic model analysis for a small open economy," Economic Systems Research, Taylor & Francis Journals, vol. 30(3), pages 380-399, July.
    4. Ådne Cappelen & Torbjørn Eika, 2020. "Immigration and the Dutch disease A counterfactual analysis of the Norwegian resource boom 2004-2013," Open Economies Review, Springer, vol. 31(3), pages 669-690, July.
    5. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2013. "The importance of the distribution sector for exchange rate pass-through in a small open economy. A large scale macroeconometric modelling approach," Discussion Papers 731, Statistics Norway, Research Department.
    6. Francesco Di Comite & dArtis Kancs, 2015. "Macro-Economic Models for R&D and Innovation Policies," JRC Working Papers on Corporate R&D and Innovation 2015-03, Joint Research Centre.
    7. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    8. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2013. "Exchange Rate Pass-through in a Small Open Economy: the Importance of the Distribution Sector," Open Economies Review, Springer, vol. 24(5), pages 853-879, November.
    9. Herzer, Dierk, 2022. "The impact of domestic and foreign R&D on TFP in developing countries," World Development, Elsevier, vol. 151(C).
    10. Minford, Lucy & Meenagh, David, 2019. "Testing a model of UK growth: A role for R&D subsidies," Economic Modelling, Elsevier, vol. 82(C), pages 152-167.
    11. Georgios Gioldasis & Antonio Musolesi & Michel Simioni, 2020. "Model uncertainty, nonlinearities and out-of-sample comparison: evidence from international technology diffusion," Working Papers hal-02790523, HAL.
    12. Bretschger, Lucas & Lechthaler, Filippo & Rausch, Sebastian & Zhang, Lin, 2017. "Knowledge diffusion, endogenous growth, and the costs of global climate policy," European Economic Review, Elsevier, vol. 93(C), pages 47-72.
    13. Hala Abou-Ali & Mohammed Belhaj, 2008. "Cost Benefit Analysis of Desert Locusts Control: A Multicountry Perspective," Working Papers 801, Economic Research Forum, revised 01 Jan 2008.
    14. Baumann, Julian & Kritikos, Alexander S., 2016. "The link between R&D, innovation and productivity: Are micro firms different?," Research Policy, Elsevier, vol. 45(6), pages 1263-1274.
    15. de Rassenfosse, Gaétan & Jaffe, Adam B., 2018. "Econometric evidence on the depreciation of innovations," European Economic Review, Elsevier, vol. 101(C), pages 625-642.
    16. Bravo-Ortega, Claudio & García Marín, Álvaro, 2011. "R&D and Productivity: A Two Way Avenue?," World Development, Elsevier, vol. 39(7), pages 1090-1107, July.
    17. Gioldasis, Georgios & Musolesi, Antonio & Simioni, Michel, 2023. "Interactive R&D spillovers: An estimation strategy based on forecasting-driven model selection," International Journal of Forecasting, Elsevier, vol. 39(1), pages 144-169.
    18. Alessandro Sterlacchini & Francesco Venturini, 2013. "Boosting Manufacturing Productivity Through R&D: International Comparisons with Special Focus on Italy," Journal of Industry, Competition and Trade, Springer, vol. 13(2), pages 187-208, June.
    19. Andrea Bonaccorsi & Daniele Biancardi & Mabel Sanchez Barrioluengo & Federico Biagi, 2019. "Study on Higher Education Institutions and Local Development," JRC Research Reports JRC117272, Joint Research Centre.
    20. Hall, Bronwyn H. & Mairesse, Jacques & Mohnen, Pierre, 2010. "Measuring the Returns to R&D," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 2, chapter 0, pages 1033-1082, Elsevier.

    More about this item

    Keywords

    R&D spillovers; total factor productivity; innovation policies;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:927. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: L Maasø (email available below). General contact details of provider: https://edirc.repec.org/data/ssbgvno.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.