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Econometric modelling of R&D and Australia's productivity

Staff working paper

This paper by Sid Shanks and Simon Zheng was released on 4 May 2006. Subsequently released and downloadable below is:

  • An addendum and additional information which consists of:
    • Update of table 6.2 basic model results
    • Residual plots and test statistics for chapter 10, 2 equation models
    • Model S2, table 10.2, chapter 10
  • Shanks and Zheng Dataset.

Download this publication

  • Contents

Cover, Copyright, Contents, Preface, Acknowledgments, Key Points, Overview

1 About the project and this paper
1.1 Background to the project
1.2 The R&D project
1.3 This paper

2 How does R&D affect productivity?
2.1 Clarification of concepts
2.2 A sketch of stages that link R&D, innovation and productivity
2.3 The accumulation of knowledge
2.4 Knowledge accumulation and growth

3 An overview of trends in R&D and productivity
3.1 Trends in R&D activity
3.2 Changes in the structure of R&D activity
3.3 Changes in the productivity of R&D
3.4 Trends in industry and aggregate productivity

4 The platform for quantitative analysis
4.1 Specification of empirical frameworks
4.2 Issues in empirical implementation and interpretation

5 Data assembly and analysis
5.1 Industry scope
5.2 Domestic business sector knowledge stocks
5.3 Domestic non-business knowledge stocks
5.4 Foreign knowledge stocks
5.5 The bi-variate relationship between business R&D and productivity
5.6 Control variables

6 Basic regressions for the market sector
6.1 The basic levels model
6.2 Basic productivity growth models

7 Extended regressions for the market sector
7.1 Extensions to the levels model
7.2 Extensions to the productivity growth models
7.3 Static versus dynamic model results
7.4 The effect of foreign R&D on Australian productivity
7.5 Summary discussion of market sector results

8 Industry estimates of the effect of R&D
8.1 Previous Australian industry studies
8.2 Regressions
8.3 Results
8.4 Concluding remarks

9 Further explorations of the effect of foreign R&D
9.1 Testing different hypotheses about the transfer of knowledge
9.2 Patent indicators as an alternative foreign knowledge output measure
9.3 Has the effect of foreign R&D changed?
9.4 Overall assessment

10 Rising business investment in R&D
10.1 The investment environment
10.2 Results from the productivity equation
10.3 Under what conditions are the social and private return close?
10.4 Results from the R&D equation
10.5 Modelling R&D expenditure rather than stocks

11 The return to R&D
11.1 Estimates of the return to R&D
11.2 The effect of R&D on productivity growth
11.3 A declining return to business R&D?
11.4 Business R&D investment and Australia’s recent economic history
11.5 Did business R&D contribute to the better productivity performance of the 1990s?
11.6 Summary and policy implications
11.7 Directions for further work

A Construction of Australian R&D databases

B Trends in costs and outsourcing

C Construction of the Australian R&D stocks

D Data for control variables

E Times series characteristics and stability tests

F Construction of the foreign knowledge stocks

G Trends in international R&D investment

H The effect of R&D in an 'expanded' market sector

I Firm size and industry concentration of R&D spending

J Manufacturing panel estimates

K Sensitivity testing of the returns

L Controlling for the effects of the business cycle

M Differentiating between transitional dynamics and permanent impacts

N Industry disaggregation of trend in R&D expenditure

O A changing partial effect of R&D on productivity?

P An upper bound for the social rate of return to R&D