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R&D and Absorptive Capacity: Theory and Empirical Evidence

Rachel Griffith (), Stephen Redding and John van Reenen ()

Scandinavian Journal of Economics, 2003, vol. 105, issue 1, 99-118

Abstract: This paper presents a single unified framework that integrates the theoretical literature on Schumpeterian endogenous growth and major strands of the empirical literature on R&D, productivity growth and productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992,1998) , we provide microeconomic foundations for the reduced-form equations for total factor productivity (TFP); growth frequently estimated empirically using industry-level data. R&D affects both innovation and the assimilation of others' discoveries ("absorptive capacity"). Long-run cross-country differences in productivity emerge endogenously, and the analysis implies that many existing studies underestimate R&D's social rate of return by neglecting absorptive capacity. Copyright The editors of the "Scandinavian Journal of Economics", 2002 .

Date: 2003
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Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

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