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The Effect Of Foreign And Domesctic Patents On Total Factor Productivity During The Second Half Of The 20th Century

  • Antonio Cubel

    (Universidad de Valencia (Spain))

  • Vicente Esteve

    (Universidad de Valencia, Universidad de Alcalá and Universidad de La Laguna (Spain))

  • M. Teresa Sanchis

    (Universidad de Valencia and Instituto Figuerola (Spain))

  • Juan A. Sanchis-Llopis

    (Universidad de Valencia and ERI-CES (Spain))

This paper analyses the relationship between total factor productivity (TFP) and innovation-related variables during the second half of the 20th century. We perform this analysis for several European countries (France, Germany, the United Kingdom, and Spain) and the U.S., extending Coe and Helpman’s (1995) empirical specification to include human capital. We use a new dataset of patents data for the past 150 years to calculate the stock of knowledge using the perpetual inventory method. Our time series empirical analysis confirms the heterogeneous relationship between innovation variables (domestic stock of knowledge, imports of knowledge, and human capital) and productivity. Our results reveal the extent to which observed differences in technology adoption patterns and the levels of endowment of such resources can explain differences in TFP dynamics across countries. The estimated coefficients confirm the considerable gap that still exists between the European countries and the U.S. in innovation-related variables. Furthermore, we obtain a finding that may have important implications for innovation policies: the higher the level of investment in human capital, the higher the level of investment in domestic innovation, and the higher the response of TFP to a 1% increase in any of the aforementioned variables.

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Paper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1404.

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Date of creation: May 2014
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Handle: RePEc:eec:wpaper:1404
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