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The International Dynamics of R&D and Innovationin the Short Run and in the Long Run

Author

Listed:
  • Giovanni Peri
  • Laura Bottaz

    (Department of Economics, University of California Davis)

Abstract

In this paper we estimate the dynamic relationship between employment in R&D and generationof knowledge as measured by patent applications across OECD countries. In severalrecently developed models, known as ?idea-based? models of growth, the afore mentioned ""ideagenerating""process is the engine of productivity growth. Moreover, in real business cycle modelstechnological shocks are an important source of fluctuations. Our empirical strategy is able totest whether knowledge spillovers are strong enough to generate sustained endogenous growthand to estimate the quantitative impact of international knowledge on technological innovationof a country in the short and in the long run. We find that a country?s stock of knowledge,its R&D resources and the stock of international knowledge move together in the long run.International knowledge has a very significant impact on innovation. As a consequence, a positiveshock to R&D in the US (the largest world innovator) has a significant positive effect onthe innovation of all other countries. Such a shock produces its largest effect on domestic andinternational innovation after five to ten years from its occurrence.

Suggested Citation

  • Giovanni Peri & Laura Bottaz, 2005. "The International Dynamics of R&D and Innovationin the Short Run and in the Long Run," Working Papers 250, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:250
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    More about this item

    Keywords

    Innovation; Weak Scale Effects; Panel Cointegration; Error Correction Mechanism; International Knowledge Spillovers;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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