The impact of R&D on factor-augmenting technical change an empirical assessment at the sector level

Abstract

The aim of the paper is to quantify endogenous factor-augmenting technical change driven by R&D investments in a panel of 11 OECD countries over 1987-2007. This paper contributes to the scant empirical evidence on the speed, sources and direction of technical change for various sectors and production factors. Assuming cost-minimization behavior, a CES framework is used to derive a system of equations that is estimated by a GMM system estimator. The estimated factor-augmenting technology parameters show that in most sectors, technical change was labor-augmenting and labor-saving. Statistically significant effects of manufacturing and services R&D were found on factor-augmenting technical change (with the highest R&D elasticities found in the high-tech manufacturing and transport, storage and communication sectors). Whereas in-house R&D stimulates total factor productivity, R&D spilled over to other sectors has a capital-augmenting effect accompanied by a higher use of labor. The results of this s…

Publication
Economic Systems Research, 29(3), pp. 385–417

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