R&D and Productivity Growth

Research and development (R&D) is broadly considered to be a source of productivity growth. This paper explores and compares the impact of different types of R&D on multi-factor productivity (MFP). Using a 19-country panel for the time period of 1985-2008, this study provides evidence that, among different types of R&D, private R&D is the major cause of multi-factor productivity. The impact of private R&D on MFP growth is robust across specifications and there is little evidence for reverse causality. The estimation results suggest that the countries where business enterprises invest more in R&D will have faster productivity growth. In addition, the results show that public R&D (defense R&D and civil R&D) does not seem to affect productivity growth