Engines of Growth: Domestic and Foreign Sources of Innovation

We examine productivity growth since World War ll in the five-leading research economies: West Germany, France, the United Kingdom, Japan, and the United States. Available data on the capital-output ratio suggests that these countries grew as they did because of their ability to adopt more productive technologies, not because of capital deepening per se. We present a multicountry model of technological innovation and diffusion which has the implication that, for a wide range of parameter values, countries converge to a common growth rate, with relative productivities depending on the speed with which countries adopt technologies developed at home and abroad. Using parameter values that fit a cross-section of data on productivity research, and patenting, we simulate the growth of the five countries given initial productivity level in 1950 and research efforts in the sub-sequent four decades. Based on plausible assumptions about "technology gap" that existed among these countries in 1950 we can explain their growth experiences quite successfully. Specifically, the 1imulation capture the magnitude of the lowdown in German, French, and Japanese productivity growth and the relative constancy of U.K. & and U.S. growth.