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Towards an Efficient Use of R&D – Accounting for Heterogeneity in the OECD

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  • Cullmann, Astrid
  • Zloczysti, Petra

Abstract

Expenditures devoted to research and development (R&D) are scarce and thus need to be used as efficiently as possible given the financial constraints countries are facing. This paper assesses the relative efficiency of R&D expenditures for 26 OECD member countries and 2 non-member countries. As countries differ in their national innovation systems and states of economic development and industrialization, e.g. transition economies in Eastern Europe vs. Asian countries vs. Anglo-Saxon countries, the measurement of R&D efficiency needs to consider differences in the technology of knowledge production. The existing empirical literature on R&D efficiency mainly builds on a homogeneous technology frontier neglecting the importance to account for country-specific heterogeneity. This paper models technological differences in knowledge production among countries using a stochastic frontier model for panel data. Applying a latent class model for SFA, we find empirical evidence for two technological classes, a `capital-intensive' and a `labor-intensive' one. Assuming a common knowledge production technology, as has been done so far in the empirical literature, thus results in biased efficiency estimates.

Suggested Citation

  • Cullmann, Astrid & Zloczysti, Petra, 2013. "Towards an Efficient Use of R&D – Accounting for Heterogeneity in the OECD," CEPR Discussion Papers 9345, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9345
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    References listed on IDEAS

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    Keywords

    innovation; knowledge production function; latent classes; R&D efficiency; stochastic frontier analysis;

    JEL classification:

    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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