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Convergencia en el esfuerzo inversor en I+D+i de las regiones españolas
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If one is to understand why some regions grow and others stagnate, there are three fundamental questions that need to be answered. First, Why and when does economic activity become concentrated in a few regions, leaving others relatively underdeveloped? Second, What role does technological change play in regional economic growth? Third, How does technological advance occur, and what are the key processes and institutions involved? To answer these three questions, the authors surveyed three separate and distinct literatures that have a long and distinguished history, and all three have been recently reexamined. They include the new economic geography (Krugman), the new growth theory (Romer), and the new economics of innovation (Nelson).
The search for a systematic set of indicators to measure the crucial dimensions of the entrepreneurship in relation to its diagnosis, forecast and tracking, has become a very first need for both the economic analysis progress, as well as to obtain an appropriate design, monitoring and evaluation of the public policies.
The main contribution of this study is to present a theoretical framework of reference that may be used as foundation to articulate a statistical subsystem of entrepreneurship indicators, a conceptual general framework that nourishes from the contributions and results, which are the core of the Economics of Entrepreneurship, and that allows us to determine the key dimensions and aspects to be captured by the system.
En este trabajo se analiza el esfuerzo inversor en I+D realizado en España en los últimos años. Tras evidenciar que, en el contexto de la UE, es mucha la distancia que nos separa del esfuerzo realizado por los países más avanzados y que las disparidades entre ellos son amplias, aunque decrecientes, el trabajo ¿mediante la aplicación de indicadores de desigualdad y técnicas no paramétricas¿ se centra en desvelar las características de la distribución regional de la I+D en España. A este respecto, la principal conclusión que se obtiene es que, a nivel agregado, las desigualdades regionales son bastante fuertes y, salvo a partir del año 2004, no ofrecen demasiadas muestras de reducirse con el paso del tiempo; y, por lo que respecta a los sectores de ejecución, sólo el de las Administraciones Públicas ha exhibido una marcada pauta decreciente. Adicionalmente, se aprecian cambios importantes en la forma externa de la distribución que son compatibles con una notable persistencia en el ranking regional. Por último, el trabajo concluye apuntando que el PIB per capita y la estructura productiva son factores que explican en buena medida la distribución regional de la I+D en España.
El presente artículo analiza el comportamiento de las empresas innovadoras de los sectores manufactureros españoles a partir de la información facilitada por la Encuesta sobre Innovación Tecnológica en las empresas de 1998 del INE. El análisis realizado permite caracterizar a la "empresa innovadora española típica" como una empresa de reducido tamaño, instalada en sectores de bajo y medio contenido tecnológico, que realiza un importante esfuerzo innovador, que distribuye sus gastos de innovación en varias actividades y no sólo se centra en la I+D, y para la que una parte importante de su cifra de negocios y de sus exportaciones está ligada a la propia innovación
Este artículo trata tres cuestiones clave en la relación tecnología-desarrollo territorial: primero, cómo pueden cuantificarse la innovación y las capacidades tecnológicas regionales; segundo, cuáles son los factores determinantes de la innovación y qué papel desempeña la localización; y, tercero, qué puede hacerse para aumentar la capacidad tecnológica de las regiones más desfavorecidas con el objeto de que ello redunde, a su vez, en una mayor competitividad y crecimiento regional. Estas cuestiones se tratan para el caso de las regiones españolas según el siguiente esquema: se parte de un diagnóstico de los desequilibrios y capacidades tecnológicas regionales desde el doble punto de vista de los recursos y resultados; a continuación, se buscan los factores microeconómicos determinantes de la innovación con un modelo apropiado; y, por último, se exponen algunas reflexiones sobre los resultados obtenidos y sus implicaciones en el diseño y aplicación de políticas regionales de innovación tecnológica en nuestro país.
We evaluate the empirical evidence regarding stochastic convergence in income across a group of 29 countries. Our results are based on a new unit root test developed by Popp (20086.
Popp , S. 2008. New innovational outlier unit root test with a break at an unknown time. Journal of Statistical Computation and Simulations, 78: 1145–61. [Taylor & Francis Online], [Web of Science ®]View all references) that estimates the break-date more accurately and does not suffer from size distortions in the presence of a break. Our results reveal considerably less evidence of stochastic convergence compared with previous studies.
The authors assume that firms invest in R&D not only to generate innovations, but also to learn from competitors and extraindustry knowledge sources (e.g., university and government labs). This argument suggests that the ease of learning within an industry will both affect R&D spending, and condition the influence of appropriability and technological opportunity conditions on R&D. For example, they show that, contrary to the traditional result, intraindustry spillovers may encourage equilibrium industry R&D investment. Regression results confirm that the impact of appropriability and technological opportunity conditions on R&D is influenced by the ease and character of learning. Copyright 1989 by Royal Economic Society.
This paper quantifies the effects of exogenous variations in the state of technology (technological opportunity) and of the R&D of other firms (spillovers of R&D) on the productivity of firms' R&D. The R&D productivity is increased by the R&D of "technological neighbors," though neighbors' R&D lowers the profits and market value of low-R&D-intensity firms. Firms are shown to adjust the technological composition of their R&D in response to technological opportunity. Copyright 1986 by American Economic Association.
Is there too much or too little research and development (R&D)? In this paper we bridge the gap between the recent growth literature and the empirical productivity literature. We derive in a growth model the relationship between the social rate of return to R&D and the coefficient estimates of the empirical literature and show that these estimates represent a lower bound. Furthermore, our analytic framework provides a direct mapping from the rate of return to the degree of underinvestment in research. Conservative estimates suggest that optimal R&D investment is at least two to four times actual investment.
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This paper surveys the empirical evidence on the link between innovation and economic growth in the light of New Growth Theory. It considers a number of different measures of innovation, such as R&D spending, patenting, and innovation counts, as well as the pervasive effect of technological spillovers between firms, industries, and countries. There are three main conclusions. The first is that innovation makes a significant contribution to growth. The second is that there are significant spillovers between countries, firms, and industries, and to a lesser extent from government-funded research. Third, that these spillovers tend to be localized, with foreign economies gaining significantly less from domestic innovation than other domestic firms. This suggests that although technological 'catch-up' may act to equalise productivity across countries, the process is likely to be slow and uncertain, and require substantial domestic innovative effort.
This paper concerns segmented multivariate regression models, models which have different linear forms in different subdomains of the domain of an independent variable. Without knowing that number and their boundaries, we first estimate the number of these subdomains using a modified Schwarz criterion. The estimated number of regions proves to be weakly consistent under fairly general conditions. We then estimate the subdomain boundaries ("thresholds") and the regression coefficients within subdomains by minimizing the sum of squares of the residuals. We show that the threshold estimates converge (at rates, 1/n and n-1/2, respectively at the model's threshold points of discontinuity and continuity) and that the regression coefficients as well as the residual variances are asymptotically normal. The basic condition on the error distribution required for the veracity of our asymptotic results is satisfied by any distribution with zero mean and a moment generating function (having bounded second derivative around zero). As an illustration, a segmented bivariate regression model is fitted to real data and the relevance of the asymptotic results is examined via simulations.
This volume provides a comprehensive review of the theoretical concepts and empirical models of entrepreneurship from a non-conventional perspective. Its main purpose is to contribute to the design of an efficient system of indicators of entrepreneurship and competitiveness. The existence of a gap between the theory of entrepreneurship and the methods and data available for testing its main propositions has been widely recognized. Hence, some of the most prestigious researchers have collaborated to review and develop the statistical sources, indicators and proxies currently available for empirical studies on the phenomena of entrepreneurship.
The book thereby makes recent advances in the theory and application of the economics of entrepreneurship accessible to a wider audience, including policy makers, emphasizing data requirements to advance the future research agenda and to allow for a better design and monitoring of entrepreneurial policy.
Although entrepreneurship has become a buzzword in the public debate, a coherent definition of entrepreneurship has not yet emerged. In this paper, we review and compare the most common theoretical definitions of entrepreneurship in economics and discuss their connection to the various empirical measures in use. We argue that entrepreneurship is best considered a multifaceted concept, and that the different empirical measures reflect different aspects of entrepreneurship. The relevance of this exercise is illustrated by the fact that in a cross-country comparison of entrepreneurship, we find that the relative ranking of countries depends crucially on the indicator used.Contents: Introduction; Defining Entrepreneurship; Measuring Entrepreneurship; Comparisons and Discussion. Conclusions; References; Appendix
Summary This paper proposes a test statistic for the null hypothesis of panel stationarity that allows for the presence of multiple structural breaks. Two different specifications are considered depending on the structural breaks affecting the individual effects and/or the time trend. The model is flexible enough to allow the number of breaks and their position to differ across individuals. The test is shown to have a standard normal limit distribution with a good finite sample performance. It is applied to typical panel data of real per capita GDP in a set of OECD countries.
The empirical analysis in "International R&D Spillovers" [Coe, D., Helpman, E., 1995. International R&D Spillovers. European Economic Review, 39, 859-887] is first revisited on an expanded data set that we have constructed for the purpose of this study. The new estimates confirm the key results reported in Coe and Helpman about the impact of domestic and foreign R&D capital stocks on TFP. In addition, we show that domestic and foreign R&D capital stocks have measurable impacts on TFP even after controlling for the impact of human capital. Furthermore, we extend the analysis to include institutional variables. Our results suggest that institutional differences are important determinants of TFP and that they impact the degree of R&D spillovers. Countries where the ease of doing business and the quality of tertiary education systems are relatively high tend to benefit more from their own R&D efforts, from international R&D spillovers, and from human capital formation. Strong patent protection is associated with higher levels of total factor productivity, higher returns to domestic R&D, and larger international R&D spillovers. Finally, countries whose legal systems are based on French and, to a lesser extent, Scandinavian law benefit less from their own and foreign R&D capital than countries whose legal origins are based on English or German law.
A model is presented based on recent theories of economic growth that treat commercially oriented innovation efforts as a major engine of technological progress. We study the extent to which a country's total factor productivity depends not only on domestic R&D capital but also on foreign R&D capital. Our estimates indicate that foreign R&D has beneficial effects on domestic productivity, and that these are stronger the more open an economy is to foreign trade. Moreover, the estimated rates of return on R&D are very high, both in terms of domestic output and international spillovers.
Using a new dataset on imports of technology and total factor productivity (TFP) over 135 years for the OECD countries, this paper tests whether knowledge has been transmitted internationally through the channel of trade. The empirical estimates show that there is a robust relationship between TFP and imports of knowledge and that 93% of the increase in TFP over the past century has been solely due to imports of knowledge. Furthermore, it is shown that knowledge spillovers have been an important contributing factor behind the TFP convergence among the OECD countries over the period 1870 to 2004.
This paper analyses productivity growth in a panel of 14 United Kingdom manufacturing industries since 1970. Innovation and technology transfer provide two potential sources of productivity growth for a country behind the technological frontier. We examine the roles played by research and development (R&D), international trade, and human capital in stimulating each source of productivity growth. Technology transfer is statistically significant and quantitatively important. While R&D raises rates of innovation, international trade enhances the speed of technology transfer. Human capital primarily affects output through private rates of return (captured in our index of labour quality) rather than measured TFP.
Recently, evidence has emerged that knowledge produced through R&D in developed countries can spill over through trade to other countries. The literature has concentrated on imports as the transmission channel. We examine whether exports are also a channel on a panel of 21 countries for 1975–1990. We find that both are sources of knowledge spillovers.
The time-series properties of per capita income and per capita earnings in the regions of the United States are tested for consistency with the neoclassical growth model's prediction of convergence. We find evidence for per capita income convergence for U.S. regions during the 1929–1990 period after allowing for a trend break in 1946. These findings support the neoclassical model's prediction of convergence. The evidence for per capita earnings convergence is, however, less conclusive. Shocks to per capita earnings are found to be more persistent than shocks to per capita income. This implies that the regional distribution of transfer payments tends to smooth the effects of deviation on relative regional per capita earnings and reinforce trends in per capita income convergence.
Using a newly available dataset on the R&D investment of individual French manufacturing firms for the 1980s, we replicate and update a series of studies on French R&D and productivity at the firm level from the 1970s, and evaluate the robustness of methods currently used to measure the private returns to R&D. Our main findings are: Having a longer history of R&D expenditures helps improve the quality of the R&D elasticity estimates, but the choice of depreciation rate for R&D capital makes little difference. The correction for double-counting of R&D expenditures in capital and labor is important and may be interpreted under certain conditions as converting a measured ‘excess’ rate of return to a total rate of return to R&D. We show that the direct production function approach to measure returns to R&D capital is preferred on several grounds over the rate of return variation used in the past. Finally, as in the 1970s, the productivity of R&D capital for French manufacturing firms in the 1980s is positive; how strong and robust depends on whether we control for potential industry and firm effects.
We propose a test of the null hypothesis that an observable series is stationary around a deterministic trend. The series is expressed as the sum of deterministic trend, random walk, and stationary error, and the test is the LM test of the hypothesis that the random walk has zero variance. The asymptotic distribution of the statistic is derived under the null and under the alternative that the series is difference-stationary. Finite sample size and power are considered in a Monte Carlo experiment. The test is applied to the Nelson-Plosser data, and for many of these series the hypothesis of trend stationarity cannot be rejected.
The time series properties of per-capita income in U.S. regions are tested for consistency with the neoclassical growth model's prediction of per-capita income convergence. Two conditions are required for convergence. Shocks to relative regional per-capita incomes should be temporary (stochastic convergence), and initially poor regions should catch up to rich regions (β-convergence). We find evidence for stochastic convergence across U.S. regions during the 1929–1990 period after allowing for a trend break in 1946. We also find that U.S. regions have achieved β-convergence. These findings support the neoclassical model's prediction of conditional convergence.
This article analysis the distribution of Spanish business innovation expenditures between its autonomous regions in 1998, and its evolution during the period 1994-1998. The main results confirm the high concentration of innovation in Madrid, Catalonia and the Basque Country, especially in high technological developed sectors, in which Madrid is very specialised. On the other side, Asturias, Canary Islands and Extremadura have an irrelevant participation in innovating expenditures. Related to the evolution between 1994 and 1998, the innovation expenditure had a big increase, but its distribution was very heterogeneous. Finally, a shift-share analysis shows that the «community effect» was very important, meanwhile the «sectorial effect» had a very small influence Este artículo analiza la distribución por comunidades autónomas de los gastos de innovación de las empresas españolas en 1998, y la evolución seguida en el período 1994-1998. Los resultados confirman la alta concentración de la innovación en Madrid, Cataluña y el País Vasco, especialmente en lo que se refiere a sectores de alto contenido tecnológico, en los que, además, Madrid está muy especializada. Por el contrario, Asturias, Canarias y Extremadura tienen una presencia irrelevante. Por lo que se refiere a la evolución seguida entre 1994 y 1998, los gastos de innovación crecieron de manera importante, pero su distribución fue muy heterogénea tanto entre CC.AA. como entre sectores tecnológicos. Un análisis shift-share muestra que el «efecto comunidad» ha sido el responsable fundamental de los cambios que se han producido en las comunidades, mientras que el «efecto sectorial» ha tenido una importancia muy reducida
An increase in the size (scale) of an economy increases the total quantity of rents that can be captured by successful innovators, which, in equilibrium, should lead to a rise in innovative activity. Conventional wisdom and the theoretical predictions of models of endogenous innovation suggest that this increased research effort should lead to more rapid growth. As noted by Charles Jones, this prediction is at odds with the post-war experience of the OECD, where the growth of the market has indeed led to an increased R&D effort that, however, has been translated into stagnant or declining growth rates. Drawing on the remarkable insights of the museum curator Seabury C. Gilfillan, this paper modifies models of endogenous innovation to allow for the possibility that a rise in the profitability of innovative activity could lead to an increased variety of differentiated solutions to similar problems. An increased variety of technologies (e.g., an increase in the number and types of contraceptives) will increase the level of utility of the average consumer. If, however, continued improvement of this increased variety of technologies requires increased research input, a rise in the scale of the market could raise the equilibrium quantity of R&D without increasing the economy's growth rate.
This paper argues that the 'scale effects' prediction of many recent R&D-based models of growth is inconsistent with the time-series evidence from industrialized economies. A modified version of the Romer model that is consistent with this evidence is proposed, but the extended model alters a key implication usually found in endogenous growth theory. Although growth in the extended model is generated endogenously through R&D, the long-run growth rate depends only on parameters that are usually taken to be exogenous, including the rate of population growth. Copyright 1995 by University of Chicago Press.
This article outlines the production function approach to the estimation of the returns to R&D and then proceeds to discuss in turn two very difficult problems: the measurement of output in R&D intensive industries and the definition and measurement of the stock R&D "capital." The latter concept leads to a discussion of modeling of the spillover effects of R&D and to suggestions for possible measurement of such effects via the concept of technological distance between firms and industries. Somewhat more familiar econometric problems (multicollinearity and simultaneity) are taken up in the next section and another section is devoted to estimation and inference problems arising more specifically in the R&D context. Several recent studies of returns to R&D are then surveyed, and the paper concludes with a plea for a lowering of expectations as to what the available data can tell us and with suggestions for ways of expanding the current data base in this field.
Traditional growth theory emphasizes the incentives for capital accumulation rather than technological progress. Innovation is treated as an exogenous process or a by-product of investment in machinery and equipment. Grossman and Helpman develop a unique approach in which innovation is viewed as a deliberate outgrowth of investments in industrial research by forward-looking, profit-seeking agents.
This paper assesses productivity spillovers from R&D, exports and the very presence of foreign direct investment (FDI) in China's manufacturing sector, based on a panel of more than 10,000 indigenous and foreign-invested firms for 1998–2001. There are positive inter-industry productivity spillovers from R&D and exports, and positive intra- and inter-industry productivity spillovers from foreign presence to indigenous Chinese firms within regions. OECD-invested firms seem to play a much greater role in inter-industry spillovers than overseas Chinese firms from Hong Kong, Macao and Taiwan within regions. The findings have important managerial and policy implications. Journal of International Business Studies (2006), 37, 544–557. doi:10.1057/palgrave.jibs.8400209
This paper calculates indices of central bank autonomy (CBA) for 163 central banks as of end-2003, and comparable indices for a subgroup of 68 central banks as of the end of the 1980s. The results confirm strong improvements in both economic and political CBA over the past couple of decades, although more progress is needed to boost political autonomy of the central banks in emerging market and developing countries. Our analysis confirms that greater CBA has on average helped to maintain low inflation levels. The paper identifies four broad principles of CBA that have been shared by the majority of countries. Significant differences exist in the area of banking supervision where many central banks have retained a key role. Finally, we discuss the sequencing of reforms to separate the conduct of monetary and fiscal policies. IMF Staff Papers (2009) 56, 263–296. doi:10.1057/imfsp.2008.25; published online 23 September 2008
In this paper we analyze the evidence from a large number of studies on three specific questions pertaining to R&D investment: (1) Are there diminishing returns to inventive activities? (2) What is the relationship between R&D and productivity and what are the magnitudes of the returns to a firm's or industry's R&D investment? (3) What are the magnitudes of the benefits from R&D undertaken by other firms, industries and countries and the vehicles by which they are transmitted to the recipients? The evidence on the first issue is still controversial, basically because of the lack of an adequate measure of output and precise measurement of the inputs to the inventive process. Patent counts are often considered as a measure of output while expenditures on R&D are used as a measure of input in this process. If proper adjustments are made and the significant spillover effects of R&D documented in this paper are taken into account, the possibility of diminishing returns to inventive activities seems implausible. On the second question, the results clearly suggest a positive and strong relationship between R&D expenditures and growth of output or total factor productivity. The relation is pervasive, though the magnitudes of the contribution of R&D vary among firms, industries and countries. On the average, net rates of return on own R&D are about 20% to 30%. There is no clear cut evidence of decline in the potency of R&D investment in the late 1970s. However, there is evidence that R&D as a factor of production affects not only productivity growth but also the demand for conventional inputs and is influenced by changes in input prices and the level of demand. The evidence points to sizable R&D spillover effects both at the firm and industry levels; the social rates of return of R&D often vary from 20% to over 100% in various industry, with an average somewhere close to 50%. The channels of diffusion of the spillovers vary considerably and their effects on productivity growth are sizable. These results suggest a substantial underinvestment in R&D activities. International technology trade among the OECD countries has increased substantially in recent years. The diffusion of new technologies has been very rapid; the channels of transmissions have been exports, foreign direct investment, and multinational enterprises' research operations, the latter being the most dynamic agents of technology transfer. With the further globalization of business activities, international technology transfers will be a major source of new R&D spillovers.
Keller (1998) reexamines Coe and Helpman`s (1995) analysis of international R&D spillovers focusing on the weights used to define the foreign R&D capital stock. Keller creates random weights and shows that they give rise to positive estimates of international R&D spillovers, casting doubts on the robustness of Coe and Helpman`s findings. We show that Keller`s random weights are essentially simple averages with a random error. We derive alternative random weights and present regressions showing that when they are used to define the foreign R&D capital stock, the estimated international R&D spillover estimates are nonexistent, as would be expected.
This paper presents estimates of the long-term impact of various sources of knowledge (R&D performed by the business sector, the public sector and foreign firms) on multifactor productivity growth of 16 countries from 1980 to 1998. The main results show that the three sources of knowledge are significant determinants of long-term productivity growth. Further evidence suggests that several factors determine the extent to which each source of knowledge contributes to productivity growth. These factors are the absorptive capability, the origin of funding, the socioeconomic objectives of government support, and the type of public institutions that perform R&D. Copyright 2004 Blackwell Publishing Ltd.
In this paper, I analyze recent findings by Coe and Helpman (1995) on trade-related international R+D spillovers. A Monte-Carlo-based robustness test is proposed which compares the elasticity of domestic productivity with respect to foreign R+D estimated by Coe and Helpman with an elasticity which is based on counterfactual international trade patterns. It is shown that also these, randomly created trade patterns give rise to positive international R+D spillover estimates, which are often larger, and explain more of the variation in productivity across countries than if 'true' bilateral trade patterns are employed. The finding casts doubt on the claim that patterns of international trade are important in driving R+D spillovers.
Why do growth rates differ? This paper surveys the recent empirical literature on economic growth, starting with a discussion of stylized facts, data problems, and statistical methods. Six research questions are emphasized, drawing on growth and convergence research. In answering these questions, the paper argues that efficiency has grown at different rates across countries, casting doubt on neoclassical models in which technology is a public good. The latter half of the paper rounds up a variety of findings before providing answers to all six questions, including a short summary of how differences in growth rates arise.
In this paper the significance of capital goods trade as conduit for R&D spillovers is investigated and the impact of international R&D spillovers on OECD countries is quantitatively assessed. Capital goods trade is tested against non-capital goods trade, and knowledge embodied in trade flows is evaluated vis-a-vis R&D spillovers in disembodied form. Our estimation indicates that about half of the return on R&D investment in a G7 country spilled over to other OECD countries. Trade in capital goods was found to be a significant channel of R&D spillovers, although the majority of the R&D spillovers in the OECD were transmitted through other channels.
A model of endogenous growth is developed in which growth is driven by vertical innovations that involve creative destruction. Equilibrium is determined by a forward-looking difference equation, according to which the amount of research in any period depends negatively upon the amount expected next period. The paper analyzes positive and normative properties of stationary equilibria, and shows conditions for the existence of cyclical equilibria and no-growth traps. The growth rate may be more or less than optimal because a business-stealing effect counteracts the usual spillover and appropriability effects. In addition, innovations tend to be too small. Copyright 1992 by The Econometric Society.
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
This paper contains a selective survey of the empirical literature on growth and convergence. After reviewing some stylized facts and developing a framework for empirical analysis, I focus on recent contributions based on various extensions of the neoclassical growth model. I summarize the main results of this literature, examine their implications, and discuss some of the questions which are left open by existing work.
This paper develops the statistical theory for testing and estimating multiple change points in regression models. The rate of convergence and limiting distribution for the estimated parameters are obtained. Several test statistics are proposed to determine the existence as well as the number of change points. A partial structural change model is considered. The authors study both fixed and shrinking magnitudes of shifts. In addition, the models allow for serially correlated disturbances (mixingales). An estimation strategy for which the location of the breaks need not be simultaneously determined is discussed. Instead, the authors' method successively estimates each break point.
Many writers have claimed that R&D has two 'faces'. In addition to the conventional role of stimulating innovation, R&D enhances technology transfer by improving the ability of firms to learn about advances in the leading edge ('absorptive capacity'). In this paper we document that there has been convergence of TFP within a panel of industries across thirteen OECD countries since 1970. Furthermore, we find evidence that both R&D and human capital appear statistically and economically important in this catch up process as well as stimulating innovation directly. Trade, by contrast, plays a more modest role in productivity growth.
Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.