Title: International R&D Spillovers: An Application of Estimation and Inference in Panel Cointegration
Abstract: In this paper, we consider the application of recent results on the estimation and inference in panel cointegration to the study of empirical economic growth. The emergence of endogenous growth theory in the 1980s has led to a resurgence of interest in the sources of economic growth. Coe and Helpman (1995), among other researchers, state that commercially oriented innovation efforts which respond to economic incentives are the major engine of technological progress and productivity growth. Coe and Helpman argue that, in a global economy, a country’s productivity depends on its own R&D efforts as well as the R&D efforts of its trading partners. Using data from 21 OECD countries plus Israel during 1971-1990, they find that both domestic and foreign R&D capital stocks have important effects on total factor productivity (TFP). We intend to re-examine the econometric foundation of Coe and Helpman’s paper. Coe and Helpman (1995) discovered that all of their data exhibit a clear trend, and unit root tests on these data indicate that the TFP and both the domestic and foreign R&D capital stocks are non-stationary. They then confirm the presence of cointegration for TFP and the domestic and foreign R&D capital stocks by testing for a unit root in the residuals. In other words, although all the variables are individually non-stationary, there exists a linear combination of these variables so that the regression containing these variables has a stationary error term. Coe and Helpman’s use of a cointegrating regression enables us to exploit the relationship among the variables in levels, without transforming the data, such as differencing, to avoid the spurious regression problem. Unfortunately, at the time of their article the econometrics of panel cointegra
Publication Year: 1999
Publication Date: 1999-11-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 317
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