Research and Productivity Growth across Industries

What factors underlie industry differences in research and productivity growth? In a multisector model with endogenous knowledge generation, we find that long run differences in sectoral productivity growth are mainly driven by receptivity — the extent to which firm research benefits from prior knowledge regardless of the source. R&D intensity also depends on appropriability — the fraction of receptivity that accrues from the firm’s own stock of knowledge. Quantitatively, we find that receptivity appears to be the main factor behind differences in both industry TFP growth rates and R&D intensities. Our results suggest that R&D subsidies should target sectors that perform less

research than might be expected based on their rate of productivity growth.

For more information, contact Dirk Krueger.