Estimating the Social Rate of Return to R&D in the Coal, Petroleum and Nuclear Energy Industries According to Country and Time Period

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Literature Review
In order to define optimal investment in R&D, it is necessary to study the rate of return to R&D investments. Jones and Williams in the 1998 paper “Measuring the Social Rate of Return to R&D” estimate the effects of non-optimal investment using an endogenous growth model. This paper will use a similar growth model to conduct its research, with the goal of estimating the social rate of return instead of the private rate of return. The reason for this distinction being the social rate of return includes positive spillovers, as mentioned previously.
As discussed in Corderi and Lin’s paper, many studies have attempted “to estimate the social rate of return accounting for different types of spillover.” There are three differing approaches making use of these spillovers. The first, exemplified by the work of Sveikauskas (1981), and Griliches and Lichtenberg (1984), regress the variable total factor productivity (TFP), which accounts for the effects of total output not caused by the traditional inputs of capital and labor. TFP will be regressed on “lagged R&D intensity which is measured as the ratio of privately financed R&D spending to sales.”
The second strategy of estimation is the incorporation of inter-industry spillovers. This is essentially using the effect of R&D in one industry and comparing it to measured productivity in other industries. Terleckyj (1980), Scherer (1982), Griliches and Lichtenberg (1984a) and Jaffe (1996) are all authors who realized and used this methodology.
The third approach makes use of international spillovers, which attempt to “capture the effect that foreign R&D has in domestic productivity through trade.” This is a sort of foreign non-direct investment. Authors that ...

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Scherer, Frederic M. (1982). “Inter-Industry Technology Flows and Productivity Growth.” Review of Economics and Statistics, 64 (4): 627-634.
Sveikauskas, Leo. "Technological Inputs and Multifactor Productivity Growth." The Review of Economics and Statistics 63.2 (1981): 275. Print.
Terleckyj, Nestor. "Direct and Indirect Effects of Industrial Research and Development on the Productivity Growth of Industries." New Developments in Productivity Measurement (1980): 357-86. Web. 3 Feb. 2014. .
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