The Impact of R&D and Technology Diffusion on Productivity Growth

This paper examines the empirical evidence on the impact of performed R&D and of embodied R&D on productivity performance in 10 major OECD countries (the G7 countries, Australia, Denmark and the Netherlands) over the last two decades. Industry-level performed R&D and embodied R&D variables were constructed from an input-output model developed in a previous paper on technology diffusion. The productivity variables used in this paper are Divisia growth indexes of TFP which were consistently estimated by an input-output based growth accounting procedure. The aggregate TFP estimates showed some recovery in the 1980s in most countries and notably in the United States, where most of this recovery was in manufacturing. The results from pooled regressions across countries and across industries during the 1970s and 1980s indicate that the rates of return of both R&D variables are positively significant and increasing in the 1980s. The estimated rate of return of direct R&D for manufacturing ...