R&D and absorptive capacity: from theory to data

Rachel Griffith, Stephen Redding and John van Reenen

No W01/03, IFS Working Papers from Institute for Fiscal Studies

Abstract: This paper presents a unified model that integrates the theoretical literatue on Schumpeterian endogenous growth, the microeconometric literature on R&D and productivity, and the empirical literature on productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for a reduced-form equation for Total Factor Productivity (TFP) growth that is commonly used in the empirical literature. We allow a role for R&D in innovation and technology transfer (absorptive capacity). The analysis suggests that many existing studies underestimate R&D's social rate of return and provides an explanation for long-run productivity levels at the industry level.

Keywords: Absorptive capacity; endogenous growth; R&D; Total Factor (search for similar items in EconPapers)
JEL-codes: O10 O30 O47 (search for similar items in EconPapers)
Pages: 34 pp
Date: 2001-03-01
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Citations: View citations in EconPapers (4)

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