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R&D, Invention and Economic Growth: An Empirical Analysis

By Hulya Ulku


Abstract: This paper investigates the relationship between R&D, invention and economic growth using international panel data of R&D expenditure and patent applications from 20 OECD countries for the period of 1981 and 1997. Our analysis suggests that though only countries with larger markets can increase their invention by investing in R&D, in most countries invention has a positive effect on per capita income growth. According to our analysis, higher income countries with larger markets receive the highest returns to their invention in terms of per capita output, and higher income countries with smaller markets receive the lowest returns. The fact that the effect of invention on per capita output is the largest in higher income countries implies that rich countries are not constrained by stagnant output growth, as implied by exogenous growth models. These results support endogenous growth theories which predict that Since its introduction in 1956 a vast amount of work has been devoted until the late 1980’ies to the empirical analysis of Solow model. However, despite the three decades of research, the convergence implication of Solow model was not confirmed by data, that is poor countries were not catching up with the rich ones. This raised the question about th

Year: 2011
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