Semi-endogenous versus Schumpeterian growth models: a critical review of the literature and new evidence

Several studies have tested semi-endogenous versus Schumpeterian growth models using different methodological approaches. This paper critically reviews these studies including their approaches and provides new evidence on this issue, by analyzing both time-series data from the United States and panel data from 19 OECD countries over the period 1980-2014. The review finds much support for Schumpeterian growth theory, but shows that all studies reviewed have several limitations, including conceptual problems associated with the use of the number/stock of patents as a measure of the flow/stock of knowledge, the possibility of spurious regressions due to non-stationary data, potential mismeasurement of R&D inputs due to possible interpolation and deflation errors, misspecification problems that can arise in difference models when variables are cointegrated, and potential spurious rejections of the unit root hypothesis for R&D intensity when the lag length in unit root tests is too small. The present study avoids these limitations and finds strong evidence in favor of semi-endogenous growth.