The impact of R&D on factor-augmenting technical changeÂ â€“ an empirical assessment at the sector level
Zuzana Smeets Kristkova,
Michiel van Dijk and
Hans Meijl ()
Economic Systems Research, 2017, vol. 29, issue 3, 385-417
The aim of the paper is to quantify endogenous factor-augmenting technical change driven by R&D investments in a panel of 11 OECD countries over 1987â€“2007. This paper contributes to the scant empirical evidence on the speed, sources and direction of technical change for various sectors and production factors. Assuming cost-minimization behavior, a CES framework is used to derive a system of equations that is estimated by a GMM system estimator. The estimated factor-augmenting technology parameters show that in most sectors, technical change was labor-augmenting and labor-saving. Statistically significant effects of manufacturing and services R&D were found on factor-augmenting technical change (with the highest R&D elasticities found in the high-tech manufacturing and transport, storage and communication sectors). Whereas â€˜in-houseâ€™ R&D stimulates total factor productivity, R&D spilled over to other sectors has a capital-augmenting effect accompanied by a higher use of labor. The results of this study provide a starting point for incorporating endogenous factor-augmenting technical change in impact assessment models aimed at broad policy analysis including economic growth, food security or climate change.
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