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

  • Markus Eberhardt

    (University of Nottingham)

  • Christian Helmers

    (Universidad Carlos III de Madrid)

  • Hubert Strauss

    (European Investment Bank)

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.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 95 (2013)
Issue (Month): 2 (May)
Pages: 436-448

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Handle: RePEc:tpr:restat:v:95:y:2013:i:2:p:436-448
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