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Measuring the "Ideas" Production Function: Evidence from International Patent Output

  • Michael E. Porter
  • Scott Stern
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    This paper estimates the parameters of the ideas' production function central to recent models of economic growth. We do so by evaluating the determinants of international' patenting rates across the OECD, where an international patent is one granted by the U.S. patent office to a foreign establishment. Taking advantage of variation in the flow of ideas produced by different countries over time, we provide evidence for three main findings. First, at the level of the production of international patents, country-level R&D productivity increases proportionally with the stock of ideas already discovered, a key parametric restriction associated with the Romer model of ideas-driven growth (Romer, 1990; Jones, 1995). Second, we find that ideas productivity in a given country is constant or declining in the worldwide stock of ideas. Ideas production by other countries raises the bar for producing new-to-the-world technology domestically, outweighing the positive effects of international knowledge spillovers. Finally, ideas productivity is concave in the size of the R&D workforce and the linkage between ideas production and overall productivity growth is small. These results suggest that while the parametric restrictions required to generate endogenous technological change may be satisfied for individual economies, the growth rate associated with such effects may be modest. There seems to be a gap between the the sustained production of ideas by advanced economies and the ability to translate ideas into measured productivity growth.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7891.

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    Date of creation: Sep 2000
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    Handle: RePEc:nbr:nberwo:7891
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    1. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    2. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    3. Wolfgang Keller, 1996. "Trade and the Transmission of Technology," Development and Comp Systems 9609001, EconWPA.
    4. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    5. Wolfgang Keller, 1997. "Trade and Transmission of Technology," NBER Working Papers 6113, National Bureau of Economic Research, Inc.
    6. Jonathan Eaton & Samuel Kortum, 1995. "Trade in Ideas: Patenting and Productivity in the OECD," NBER Working Papers 5049, National Bureau of Economic Research, Inc.
    7. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    8. Adam B. Jaffe & Manuel Trajtenberg, 1998. "International Knowledge Flows: Evidence from Patent Citations," NBER Working Papers 6507, National Bureau of Economic Research, Inc.
    9. Bental, Benjamin & Peled, Dan, 1996. "The Accumulation of Wealth and the Cyclical Generation of New Technologies: A Search Theoretic Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 687-718, August.
    10. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May.
    11. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
    12. Zvi Griliches, 1990. "Patent Statistics as Economic Indicators: A Survey," NBER Working Papers 3301, National Bureau of Economic Research, Inc.
    13. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
    14. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-70, Special I.
    15. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
    16. Samuel S. Kortum, 1997. "Research, Patenting, and Technological Change," Econometrica, Econometric Society, vol. 65(6), pages 1389-1420, November.
    17. Park, Walter G, 1995. "International R&D Spillovers and OECD Economic Growth," Economic Inquiry, Western Economic Association International, vol. 33(4), pages 571-91, October.
    18. Chihwa Kao & Min-Hsien Chiang, 1997. "On the Estimation and Inference of a Cointegrated Regression in Panel Data," Econometrics 9703001, EconWPA.
    19. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
    20. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
    21. repec:fth:harver:1473 is not listed on IDEAS
    22. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1, August.
    23. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
    24. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
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