Research, technology frontier and productivity growth

Abstract

ABSTRACT: This paper uses the Jones (1995) framework to examine the contribution of imitation activities and innovative research effort on productivity growth for the US and some European leading economies. We carry out a comparative analysis for the last 50 years, with two model specifications, assuming country differences in the parameters associated with R&D effort. In the first one, the technological frontier position is determined by the country with the highest productivity, the United States. Alternatively, in the second specification, we alter the definition of the technological frontier, allowing it to transcend the leader. The empirical analysis leads to very different outcomes. The first specification estimation, using GMM techniques, indicates that American researchers are more technology growth enhancing than their European counterparts. In contrast, the results obtained for the second, using Kalman’s filter, show that when using an alternative definition of technological frontier, it is possible to observe a boost in innovation that reduces the dispersion among countries. Then, the leading European countries can take advantage; in this case, Germany exhibits the best performance, followed by the US.