Addressing Keller's Critique: More on the Identification of Productive Technology Spillovers

Bart Los, University of Groningen, Groningen Growth and Development Centre

R&D activities by one industry can have positive effects on the productivity performance of other industries, as a consequence of technology spillovers. Multicollinearity problems, however, have precluded the identification of industries that have been responsible for the most important technology spillovers. This paper proposes an alternative estimation approach (Minimum Cross Entropy econometrics) to cope with these problems. For a number of manufacturing industries, rates of return to R&D expenditures by other industries are estimated on a bilateral basis. Furthermore, productivity effects of spillovers from the foreign counterparts of the industry are estimated. The analysis is done for eighteen industries in twelve OECD countries in the period 1976-1999.

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Keywords: technology spillovers, sectoral productivity growth, entropy econometrics

JEL classification: C29, O33, O47

Research Areas: Macroeconomic Analysis and Policy