Archived — Research Summaries: Working Paper 2006-02: Research and Development Composition and Labour Productivity Growth in 16 OECD Countries

by Ram C. Acharya and Serge Coulombe.

Using data for 16 OECD countries from 1973 to 2000, we show that growth in labor productivity is highly responsive to business research and development (R&D) expenditures. Increasing business R&D intensity by 10 percent increases labor productivity in the long run by 2.4 to 5 percent. R&D expenditures on higher education also have a significant positive effect on labor productivity growth. In our decomposition of the sectoral R&D into a pure R&D intensity effect and a sectoral size effect, results show that elasticity of labor productivity with respect to these variables differs by sector. The positive size effect dominates the high-tech manufacturer, whereas it is the intensity effect that drives the positive correlation between medium-low-tech manufacturer R&D and labor productivity.

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