The Modern Drivers of Productivity

Using country-level data, this paper investigates the determinants of pro-ductivity in emerging knowledge economies by estimating the spillovers as-sociated with investment in Research & Development (R&D) and Informa-tion Technology (IT). The work illustrates that both forms of technically-advanced capital (R&D and IT) matter for long-run TFP growth. Further-more, by inspecting knowledge spillovers associated with either the domes-tic production or import penetration of high-tech (IT) goods, we show that the R&D base of the domestic producers of IT assets is a fundamental driver of economic growth for the industrialized countries. In terms of TFP gains, a low degree of industry specialization in information technology can only partly be compensated by a country’s trade openness, i.e. importing R&D-intensive (IT) goods from abroad. This contrasts to what occurs for less technically-advanced (non-IT) productions, for which trade is an effective conduit for knowledge