DP840 International R&D Spillovers

Author(s): David T Coe , Elhanan Helpman

Publication Date: October 1993

Keyword(s): Economic Growth , International Trade , R&D

JEL(s): F1 , O4

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP840.asp

Investment in research and development (R&D) affects a country's total factor productivity. Recently new theories of economic growth have emphasized this link and have also identified a number of channels through which a country's R&D affects total factor productivity of its trade partners. Following these theoretical developments we estimate the effects of a country's R&D capital stock and the R&D capital stocks of its trade partners on the country's total factor productivity. We find large effects of both domestic and foreign R&D capital stocks on total factor productivity. The foreign R&D capital stocks have particularly large effects on the smaller countries in our sample (that consists of 22 countries). Moreover, we find that about one-quarter of the worldwide benefits of investment in R&D in the seven largest economies are appropriated by their trade partners.