Discussion paper

DP840 International R&D Spillovers

Investment in research and development (R&D) affects a country's total factor productivity. Recently new theories of economic growth have emphasized this link and have also identified a number of channels through which a country's R&D affects total factor productivity of its trade partners. Following these theoretical developments we estimate the effects of a country's R&D capital stock and the R&D capital stocks of its trade partners on the country's total factor productivity. We find large effects of both domestic and foreign R&D capital stocks on total factor productivity. The foreign R&D capital stocks have particularly large effects on the smaller countries in our sample (that consists of 22 countries). Moreover, we find that about one-quarter of the worldwide benefits of investment in R&D in the seven largest economies are appropriated by their trade partners.


Helpman, E and D Coe (1993), ‘DP840 International R&D Spillovers‘, CEPR Discussion Paper No. 840. CEPR Press, Paris & London. https://cepr.org/publications/dp840