Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/35500 
Year of Publication: 
2009
Series/Report no.: 
IZA Discussion Papers No. 3945
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper discusses the link between R&D and productivity across the European industrial and service sectors. The empirical analysis is based on both the European sectoral OECD data and on a unique micro longitudinal database consisting of 532 top European R&D investors. The main conclusions are as follows. First, the R&D stock has a significant positive impact on labour productivity; this general result is largely consistent with previous literature in terms of the sign, the significance and the magnitude of the estimated coefficients. More interestingly, both at sectoral and firm levels the R&D coefficient increases monotonically (both in significance and magnitude) when we move from the low-tech to the medium and high-tech sectors. This outcome means that corporate R&D investment is more effective in the high-tech sectors and this may need to be taken into account when designing policy instruments (subsidies, fiscal incentives, etc.) in support of private R&D. However, R&D investment is not the sole source of productivity gains; technological change embodied in gross investment is of comparable importance on aggregate and is the main determinant of productivity increase in the low-tech sectors. Hence, an economic policy aiming to increase productivity in the low-tech sectors should support overall capital formation.
Subjects: 
R&D
productivity
high-tech sectors
innovation
industrial policy
JEL: 
O33
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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