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This paper presents a unified model that integrates the theoretical literatue on Schumpeterian endogenous growth, the microeconometric literature on R&D and productivity, and the empirical literature on productivity convergence. Starting from a structural model of endogenous growth following Aghion and Howitt (1992, 1998), we provide microeconomic foundations for a reduced-form equation for Total Factor Productivity (TFP) growth that is commonly used in the empirical literature. We allow a role for R&D in innovation and technology transfer (absorptive capacity). The analysis suggests that many existing studies underestimate R&D's social rate of return and provides an explanation for long-run productivity levels at the industry level.
Authors
CPP Co-Director, IFS Research Director
Rachel is Research Director and Professor at the University of Manchester. She was made a Dame for services to economic policy and education in 2021.
Stephen Redding
John Van Reenen
Working Paper details
- DOI
- 10.1920/wp.ifs.2001.0103
- Publisher
- IFS
Suggested citation
R, Griffith and S, Redding and J, Van Reenen. (2001). R&D and absorptive capacity: from theory to data. London: IFS. Available at: https://ifs.org.uk/publications/rd-and-absorptive-capacity-theory-data (accessed: 20 May 2024).
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