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Trade and product innovations as sources for productivity increases: an empirical analysis

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  • Butter, Frank A.G. den

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Wit, Paul

Abstract

Commonly increases in total factor productivity (TFP) are associated with technological innovations measured by R&D expenditures. Empirical evidence seems to corroborate this relationship. However, in trading countries like the Netherlands, productivity increases, even in industry, can also be the result of innovations in the way transactions are managed. These innovations reduce transaction costs and exploit the welfare gains from (further) international division of labour. Such innovations are only partly included in R&D data. Consequently there is not much attention for these "trade innovations" - as we label them - in policy. In an empirical analysis this paper compares the influence of trade innovations with the influence of R&D expenditures on TFP in various industrialized countries. It appears that, at least in the Netherlands, trade innovations are as important for TFP as technological innovations which directly affect the efficiency of production, and which we label "product innovations".

Suggested Citation

  • Butter, Frank A.G. den & Wit, Paul, 2006. "Trade and product innovations as sources for productivity increases: an empirical analysis," Serie Research Memoranda 0013, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:2006-13
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    More about this item

    Keywords

    R&D; Innovation; Transaction costs; Total factor productivity;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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