The impact of R&D on factor-augmenting technical changean empirical assessment at the sector level


textcopyright 2017 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. The aim of the paper is to quantify endogenous factor-augmenting technical change driven by R & D investments in a panel of 11 OECD countries over 19872007. This paper contributes to the scant empirical evidence on the speed, sources and direction of technical change for various sectors and production factors. Assuming cost-minimization behavior, a CES framework is used to derive a system of equations that is estimated by a GMM system estimator. The estimated factor-augmenting technology parameters show that in most sectors, technical change was labor-augmenting and labor-saving. Statistically significant effects of manufacturing and services R & D were found on factor-augmenting technical change (with the highest R & D elasticities found in the high-tech manufacturing and transport, storage and communication sectors). Whereas in-house R & D stimulates total factor productivity, R & D spilled over to other sectors has a capital-augmenting effect accompanied by a higher use of labor. The results of this study provide a starting point for incorporating endogenous factor-augmenting technical change in impact assessment models aimed at broad policy analysis including economic growth, food security or climate change.

Economic Systems Research, 29(3)