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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One of the most important factors in improving productivity is innovation. The rate at which innovations diffuse through an economy is equally important. Technological innovations have had a tremendous impact on the exchange of informationand services in both the private and public sectors (Carter, Schaupp, & McBride, 2011).
What should be held true - the hype or the dismal statistics? The answer to this question is of crucial importance to economies in transition. If investment in IT (information technology) actually RETARDS growth - then it should be avoided, at least until a functioning marketplace is there to counter its growth suppressing effects.
The theory model has a residual in the equation and later Mankiw and other researchers realized that much of residual might be due to human capital. Thus, researchers developed augmented Solow models, which contain human capital as an independent variable in explaining GDP growth. The human capital theory (Teixeira, 2016) is the foundation of this research as a country puts investment into educating human to learn skills and technology, the production per worker will increase as same as an operating machine with more advanced technology in the factory. In addition, workers with higher skill and expertise in technology can earn higher earnings to maintain healthy body and thus produce long term reliable production at work, and lead to increase in production for the employer, then the industry and the nation. By using the cognitive skills in measuring human capital can enable the research to see how effective is the education spending on the growth of the nation. From the research question of this study, how do student test scores in math and science affects the national GDP per capita, and the following hypothesis emerges: H1. Country with higher student test scores than OECD average in math and science will grow faster in terms of GDP per capita; H2. Country with lower student test scores than OECD average in math and science will grow slower in terms of
It assumes that public and private investment in human capital generate external economies and productivity improvements that offsets the natural tendency for diminishing returns
3. Private investment in Research and Development is the most important source of technological progress
In recent economic climate the link between technology transfers and Foreign Direct Investment seems to be essential for the Multinational Corporations. The main objective of MNCs is to maximize its profits. This requires them to produce the goods and services at the lowest possible cost (fixed and variable) by exploiting the resources of the developing countries apart from their home country (Pool and Stamos 1990). The channels of international technology transfer and their importance of growth have been studies extensively in 1990s. The study identifies three principal channels of international technology spillovers. The first is the direct transfer of technology via international licensing agreement (Eaton and Kortum 1996) on the contrary this source is considered less prominent as most valuable technologies are not available on license (World Investment Report 2000). The second is FDI from developed countries to developing countries as it is considered the cheapest and most reliable technique as a spillover (Blomström and Kokko 1997). The third is technology transfer through international trade where import and export of intermediate goods and capital products are exchanged (Markusen 1989, Clerides, Lach and Tybout 1997). On the other hand, it is seen that MNCs do not encourage spillovers due to (a) transmission of technology to their subsidiaries abroad. (b) Technologies that does not support the host country’s environment. (c) Maintain a control over the technology by reducing the spillovers and encouraging import. (d) Maintaining advanced technology than developing countries through Intellectual Property Rights (Aitken and Harrison et al. 1999). As an emerging economy, India has a huge presence of multinational corporations...
Second is the inequality paradox whereby technological advances increases workers wages greatly at the national level than at the degree of establishment. In order to explain these inconsistencies, technology and productivity should well defined and measured in future, so as to estimate and conceptualize the relationship between technological change, wages and skills; and also include a study of the impact of technological advances on firm’s employment systems and the human resource
The focus of this paper will be on using quantitatively analysing innovation’s effect on economic development and country-wise prospects of future growth
R&D is recognized as an important driver of economic and social progress worldwide. It can be a powerful source to improve productivity, innovation, and competitiveness; to help to reduce poverty, and to stimulate long-term economic growth. According to th...
Schmookler analyses of the relationship between S&T and the economy, while being similar to the linear model in the fact that there is no role for the firm in these two theories of technological improvement; it differs in the direction of the relationship. Shmookler concluded from patent and economic data that innovation lags behind production and investment in some industries such ...
Theoretical model of modern economic growth shows that long-term economic growth and raise the level of per capita income depends on technological progress. This is because of without technological progress and with the increase of capital per capita, marginal returns of capital would diminish and output per capita growth would eventually stagnate (Solow, 1956; Swan, 1956). Studies have shown that “experience, skills and knowledge in the long-term economic growth is playing an increasingly important role” (World Bank, 1999). Despite how technological progress work on economic growth, and how there are different views on the role of in the end, but I am afraid no one would deny that technical progress in the important role of economic development. In this sense, for a country to achieve long-term economic growth, we must continue to promote technological progress. However, economic growth theory is analyzed in general, and usually under the assumption that in the closed economy, and technological progress in a country not normally have taken place in various departments at the same time, and now the economy are often increasingly open economy. In this way, the technological progress in different economic impact on a country may be quite different. In addition, we assume that technological progress is Hicks neutral, is to an industry in itself, but technological progress also reflects the establishment of new industries and development. The new industries and technology-intensive industries generally older than the high, the use of less labor. Even the old industries, the general trend of technological progress is labor-saving.
Economics growth is important to a country. It addresses a country’s wealth, employment, attractiveness to foreign investment, standard of living and other important factors. Total factor productivity plays an important factor especially in the process of an economic growth where economists have long acknowledged and further communication has been ongoing on how important it is. There have been all sorts of questions with regards to economic development and macroeconomic subjects. Example, are why do economics grow? Grow faster? While labour and investment are an important contributor, technology growth and efficiency are two of the biggest sub-sections of total factor productivity. In this report, we will further examine total
Choi, J-Y, Lee J-H, & Sohn S-Y 2009, 'Impact analysis for national R&D funding in science and technology using quantification method II ', Research Policy, vol. 38, no. 10, pp. 1534-1544.
Sukar, A., Ahmed, S., & Hassan, S. (n.d.). THE EFFECTS OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH. Southwestern Economic Review.