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Do Spillovers Matter When Estimating Private Returns to R&D?

Author

Listed:
  • Markus Eberhardt

    (University of Nottingham)

  • Christian Helmers

    (Universidad Carlos III de Madrid)

  • Hubert Strauss

    (European Investment Bank)

Abstract

A large body of literature estimates private returns to R&D adopting the Griliches knowledge production framework, which ignores the potential impact of spillovers on consistent estimation. Using a panel of twelve manufacturing industries across ten OECD economies, we investigate whether ignoring spillovers leads to bias in the estimated private returns to R&D. We compare results from a common factor framework, which accounts for spillovers and other unobserved shocks, to those from a standard Griliches approach. Our findings confirm that conventional estimates conflate own-R&D and spillover effects, implying that spillovers cannot be ignored even when the interest lies exclusively in evaluating private returns to R&D. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Markus Eberhardt & Christian Helmers & Hubert Strauss, 2013. "Do Spillovers Matter When Estimating Private Returns to R&D?," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 436-448, May.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:2:p:436-448
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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    1. Do Spillovers Matter When Estimating Private Returns to R&D? (REStat 2013) in ReplicationWiki

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