Productivity Spillovers Across Countries and Industries: New Evidence From OECD Countries
| Published date | 01 August 2016 |
| Author | Harald Badinger,Peter Egger |
| DOI | http://doi.org/10.1111/obes.12122 |
| Date | 01 August 2016 |
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©2015 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd.
OXFORD BULLETIN OF ECONOMICSAND STATISTICS, 78, 4 (2016) 0305–9049
doi: 10.1111/obes.12122
Productivity SpilloversAcross Countries
and Industries: New Evidence From OECD
Countries*
Harald Badinger† and Peter Egger‡
†Department of Economics, Vienna University of Economics and Business, Welthandelsplatz
1 A-1020,Vienna, Austria (e-mail: harald.badinger@wu.ac.at)
‡Department of Economics, ETH Z¨urich, KOF, WEH E6 Weinbergstrasse 35 8092,Z¨urich,
Switzerland (e-mail: egger@kof.ethz.ch)
Abstract
This paper uses a translog approach to estimate intra- and inter-industry productivity
spillovers transmitted through input–output linkages, distinguishing R&D and other (re-
mainder) spillovers. For a panel of 12 OECD countries and 15 manufacturing industries
from 1995–2005, first, we find that the estimated elasticity with respect to ‘own’ R&D
amounts to 0.25 on average (which would be estimated to be lower if R&D were assumed
to be additively separable from other inputs). Second, there are sizeable intra-industry
and relatively small inter-industry R&D spillovers. Third, there are significant remainder
spillovers, which are mainly of the intra-industry type and substantially amplify idiosyn-
cratic technology shocks.
I. Introduction
‘…the transmission of technological change may also take the form of a circular process.
Under such a configuration, technological improvements have a magnified impact.…All
these repercussions – vertical or triangular – form part of a response mechanism that con-
tributes to technological advancement’ (Balassa, 1961, p. 150).
The process of economic integration after World WarII has markedly intensified the inter-
dependence of economic systems at all levels of aggregation – firms, industries, regions,
and even countries. The reduction of barriers to transport and trade, improvements of in-
frastructure facilities, better availability of high-quality information and communication
technologies, and access to new modes of specialization have induced sizeable growth in
trade of both final and intermediate goods as well as foreign direct investment, which is
widely held to have indirectly triggered productivity growth effects. Moreover, the men-
tioned modes of interaction have not only likely affected productivity locally but also the
JEL Classification numbers: L60, C21, F14
*We wish to thank the editor in charge (Jonathan Temple) and two anonymous referees for numerous helpful
comments on earlier versions of this paper.
502 Bulletin
propagation of technology shocks within and across sectors, both nationally and interna-
tionally.
The goal of the present paper is to shed more light on the magnitude and transmis-
sion of these types of spillovers by providing a comprehensive empirical assessment of
intra- and inter-industry productivity spillovers for a panel of 12 OECD countries and 15
manufacturing industries over the period 1995–2005. It builds on a strand of the literature
that has originated and been heavily influenced by Coe and Helpman (1995), who started
off a growing body of work assessing the magnitude and transmission channels of such
spillovers at various levels – among firms, industries, regions, and countries.
Most of the previous workfocuses on spillovers in a geographical dimension only.1Rela-
tivelyfew studies consider spillovers in other dimensions than just geographical space. And
those studies which do so consider spilloversbetween firms or industries, but they typically
assume these spillovers only happen within countries (see Morrison Paul and Siegel, 1999,
or Cohen and Morrison Paul, 2005). Only a few studies consider spillovers across indus-
tries as well as countries or regions. Examples for the analysis of cross-country-and-sector
spillovers are Bernstein and Mohnen (1998) and Keller (2002). Bernstein and Mohnen
(1998) estimate spillovers from research and development (henceforth R&D) for selected
manufacturing sectors between the US and Japan over the period 1962–86. Keller (2002)
considers knowledge spilloversbetween manufacturing sectors of eight major OECD coun-
tries over the period 1970–91. A related strand of the literature (e.g. Griffith, Redding and
Van Reenen, 2004; Cameron, Proudman and Redding, 2005) has established the role of
R&D as a determinant not only of innovation rates but also of an industry’s absor ptive
capacity, facilitating technology transfer and catching up to the technology frontier.
There is broad evidence that spillovers are associated with or structurally transmitted
through import and export transactions, foreign direct investment, and that they decline
with geographical distance also for other reasons (see Keller, 2004).
Earlier work on technology spillovers assumes that spillovers originate from observable
factors, mainly R&D, and typically rests on the assumptions of Cobb–Douglas production
technologies and of a linear separability of the impact of ownand other (countries’, regions’,
industries’, or firms’) R&D.Yet, there is broad evidence rejecting the assumption of Cobb–
Douglas technologies at least at the levelof sectors or firms (see, e.g. Christensen, Jorgenson
and Lau, 1973; Berndt and Khaled, 1979). If R&D is not separable from other production
factors in a flexible production technology such as translog, not onlyits own effect but also
the nature and magnitude of R&D spillovers will differ from Cobb–Douglas economies:
not only will the magnitude of the overall effects likely be different (due to an omitted
variables bias of the Cobb–Douglas estimates, if translog applies), but these effects will
also vary with the level of the stock of R&D itself and also with the usage levels of other
production factors. When ignoring spillovers from unobservable technology shifters and
considering spilloversfrom R&D alone, one would generally underestimate the importance
of technological interdependence at large.
1See, e.g. Lichtenberg andVan Pottelsberghede la Potterie (1998), Aitken and Harrison (1999), Jacobs, Nahuis and
Tang (2002), Guellec andVan Pottelsberghe de la Potterie (2004), Keller (2004), Ebersbergerand L ¨o¨of (2005), Hu,
Jefferson and Jinchang (2005), Branstetter (2006), Chen and Swenson (2007), G¨org, Hijzen and Murakozy (2006),
Hale and Long (2006), Blonigen and Ma (2010), L¨o¨of (2007), Keller and Yeaple (2009), Bloom, Schankerman and
van Reenen (2013).
©2015 The Department of Economics, University of Oxford and JohnWiley & Sons Ltd
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