Is R&D always growth-enhancing? Empirical evidence from the EU countries

This study provides empirical evidence regarding the effects of R&D on economic growth in a panel of 28 European Union (EU) countries over the period 1997–2014. In particular, we investigate whether the impact of business and government R&D stocks on economic growth depends on the country’s distance to the world technology frontier. The main findings are that in the EU (i) there is positive, statistically significant business R&D stock–economic growth nexus in countries that are relatively close to the frontier and (ii) no statistically significant relationship was found to exist between government R&D stock and economic growth. From the policy perspective, the results suggest that designing proper national policies that allow switching from investment-based to innovation-based strategies at appropriate moments may be far more important than a simple call for increase in R&D expenditures and setting common numerical targets for all EU-member states.     

The management function of entrepreneurs and countries’ productivity growth

This article examines the determinants of the equilibrium number of entrepreneurs and the level of productivity in economies where individuals make occupational choices between being self-employed or working as an employee. The results of the theoretical model explain some observed empirical regularities, such as the negative association between productivity and self-employment rates in cross-country data. The article also derives and empirically tests an unexplored relationship between entrepreneurship and economic growth, in the form of a positive association between productivity growth in t and the proportion of the self-employed in t???1, providing a new perspective on cross-country productivity convergence over time.     

Explaining differences in the productivity of investment across countries in the context of ‘new growth theory’

The purpose of this paper is to explain differences in the productivity of investment across 84 rich and poor countries over the period 1980–2011, and to test the orthodox neoclassical assumption of diminishing returns to capital. The productivity of investment is measured as the ratio of the long-run growth of GDP to a country’s gross investment ratio. Twenty potential determinants are considered using a general-to-specific model selection algorithm. Education, government consumption, geography, export growth, openness, political rights and macroeconomic instability are the most important variables. The data also suggest constant returns to capital, so investment and the determinants of productivity of investment differences matter for long-run growth.     

Effects of re-invention on industry growth and productivity: evidence from steel refining technology in Japan, 1957–1968

This paper examines the economic impact of re-invention – the degree to which an innovation is modified by user – on industry growth and productivity. The paper focuses on two re-inventions made by a Japanese steel company; these inventions improved the productive efficiency of Austrian-made refining technology, namely basic oxygen furnace (BOF). Results obtained from the plant-level production function estimation indicate that re-inventions account for approximately 30% of the total factor productivity of the BOF, substantially promoting the dissemination of the BOF technology. Our simulation analysis indeed reveals that re-inventions contributed to steel output growth by about 14%. This paper also documents that innovating companies played the role of a ‘lead user’ in developing and disseminating their re-invented technologies.     

Does productivity in Africa benefit from advanced countries’ R&D?

This study employs dynamic ordinary least squares and panel co-integration to estimate advanced countries’ R&D spillover effects on labour productivity in 28 Sub-Saharan African countries over the period 1992–2011. Results show that African countries that import and receive (technical and non-technical) development aid from advanced countries experience an increase in labour productivity, suggesting that trade and aid are transmitters of foreign R&D. However, the extent to which labour productivity responds to R&D spillovers varies based on the country of origin, where spillovers from the USA have a greater impact compared to those from other advanced countries.     

Financial crisis and hotels’ labour productivity growth: evidence from Spanish islands

The article examines hotels’ labour productivity growth over the period of financial crisis. We decompose hotels’ labour productivity into three components: technological change, technological catch-up (efficiency improvement/convergence) and capital deepening. Specifically, we apply our analysis over a sample of 820 Spanish hotels from Balearic and Canary Islands distinguishing three different stages during the crisis period. The results suggest that average terms hotels’ labour productivity was resistant to the financial crisis.     

Does export and productivity growth linkage exist? Evidence from the Indian manufacturing industry

This paper examines the interrelation between exporting and productivity performance by using a representative sample of Indian manufacturing firms over the period 1994–2006. Specifically, we attempt to test the empirical validity of the learning‐by‐exporting and the self‐selection hypotheses for our sample firms. In order to investigate the linkage, in the first step, we test for causality between TFP and export intensity of firms. Although overall results are rather mixed and provide some support for both hypotheses, still the empirical results are more favorable for the self‐selection behavior of firms. In the next stage, we attempt to provide evidence on export and productivity linkage that occurs during various phases of transition in the export market. Our results suggest that entering in the export market does not improve productivity performance. However, the decision to exit from the export market does have an adverse effect on the productivity. In addition, our results indicate the presence of a high sunk cost of exporting coupled with perhaps lesser information about foreign markets. Finally, our results also lend some support to the significant role of in‐house research activities and economies of scale in firms' productivity performance.     

The impact of product market competition on GDP per capita growth in the EU countries: does the model of capitalism matter?

This article assesses whether the intensity of product market competition is a factor affecting economic growth (measured by the growth rate of real GDP per capita) and whether this impact depends on the model of capitalism. The study covers the 1997–2015 period and all EU28 countries. Product market competition is measured by two types of variables: product market regulation indicators and the number of enterprises. New elements in the analysis include, among others, nonlinear impact and overlapping observations. The regression equations are estimated on the basis of Blundell and Bond’s GMM system estimator. The results generally indicate that stronger product market regulations (and theoretically lower product market competition) are linked with faster growth of output. However, the impact of product market competition on economic growth depends on the type of capitalism. For post-socialist countries, unlike the Western European model of capitalism, more regulation tends to reduce the rate of economic growth.     

Non-commercial goals and financial performance of state-owned enterprises – some evidence from the electricity sector in the EU countries

This study considers the financial performance of state-owned enterprises (SOEs) in relation to non-commercial goals. We focus on enterprises operating in the production of electricity sector in the EU countries and analyse their profitability conditioning on the level of electricity prices. We reveal that SOEs underperform as compared to their privately owned counterparts when they operate in those markets that have lower prices. This suggests that their profitability is likely to be substantially affected by pursuing goals other than profit-maximisation - providing crucial products and services at affordable prices - and emphasises a need to consider the non-commercial objectives of SOEs in the empirical research.     

China’s competition and the export price strategies of developed countries

This paper analyzes the impact of Chinese competition on developed countries’ export prices. The empirical application is on Italy, one of the main European manufacturing exporters with exports at high risk of competition from China. Our results show that, following China’s entry into the WTO, the price strategies of Italian firms has been affected. While in general the increasing Chinese export competition resulted in an upgrading of products exported, the impact has been different according to the sector and technological level. The incentives to upgrade have been stronger for low technology sectors, where competition is tougher and varieties of products sold lower. To highlight quality differentials, and isolate the effects on the different segments of the distribution of Italy’s export prices, we run quantile regressions. We find that are mainly those products sold at low prices to face a strong pressure to upgrade.     

Effects of exports on productivity and growth in India: an industry–based analysis

This study analyses the effects of exports on the level of output per capita using the panel estimates of an extended version of the Mankiw, Romer and Weil (The Quarterly Journal of Economics, CVII, 407-37, 1992) model, and on the total factor productivity using the time series estimators. The analysis is carried out for ten industries in the manufacturing sector in India. The results do not provide any evidence of convergence, and instead support the contrary evidence of divergence among industries. The exports do not induce convergence and instead seem to accentuate the process of divergence among industries. The study provides some evidence for the significant effects of exports on the level of output per capita and TFP in the manufacturing sector. The effects of exports on TFP are significant in half of the sample industries, while in the remaining half these are statistically insignificant.     

The effect of financial development on economic growth: evidence from the APEC countries, 1981–2000

Using the modified growth model, this study examines whether financial development would facilitate economic growth among the Asia-Pacific Economic Cooperation (APEC) countries from 1981 to 2000. It focuses on the effects of three aspects of financial development on growth: stock market, banking sector and capital flow. To control for the country-specific effect, the model is further estimated for the developed and developing member countries. Results suggest that among the three financial sectors, only the stock market development shows strong growth-enhancing effect, especially among the developed member countries. This positive relationship remains very robust even after controlling for the simultaneity bias. Thus, there is no evidence to suggest that the level of financial infrastructure development does affect the overall finance–growth relationship observed in this study.     

Is growth corrupted or bureaucratic? Panel evidence from the enlarged EU

This article aims at analysing the issue of conditional convergence in the new enlarged European Union (EU) over the period 1995–2012 by means of panel data techniques. We examined the issue of conditional convergence in the enlarged EU giving particular attention to the effects of corruption and bureaucracy on growth controlling for a widely used set of explanatory variables such as investment (domestic and foreign), human capital formation, inflation, general government final consumption and trade openness. Furthermore, we examine if growth responds differently to corruption and bureaucracy in the new EU members by means of two group-specific interaction variables to capture possible different responses to corruption and bureaucracy. The analysis reveals evidence of conditional convergence in the enlarged EU, with investment share, foreign direct investment, human capital, and country openness appearing as robust growth drivers. In contrast, inflation and government consumption rather hamper growth. Furthermore, the effects of corruption and bureaucracy on growth seem to differ across old and new EU members.     

Are exports a reliable source of economic growth in MENA countries? New evidence from the rolling Granger causality method

Empirical Economics - Earlier investigations have concentrated on the effect of export expansion on economic growth while ignoring the importance of the stability of such relationship. This paper...     

What is the role of innovation in productivity growth in Central and Eastern European countries?

The paper uses company level data from the Eurostat's Community Innovation Survey 2008 and applies CDM model in order to estimate the links between R&D engagement, R&D intensity, innovation output and productivity in selected Central and Eastern European Countries – Bulgaria and Romania, and compares their performance with Germany. The results showed that different processes drive company's decision to engage in R&D in Bulgaria and Romania in comparison to Germany; R&D intensity is an important factor of product innovation in the observed CEE countries and product innovation leads to higher productivity in Bulgaria and Romania, while process innovation leads to higher productivity in Bulgaria, but not in Romania.     

Are developing countries accumulating sufficient total factor productivity to sustain their economic growth and job creation? Empirical evidence from the Middle East and North Africa region

This study contributes new evidence on why the Middle East and North Africa (MENA) region has failed to create decent jobs for decades. The growth accounting exercise reveals that the region suffered from an acute total factor productivity (TFP) deficit in the 1990s; it improved remarkably in the 2000s, before deteriorating significantly in the period between 2010 and 2017. Throughout the three subperiods, the region’s growth relied heavily on capital accumulation. The severe deficit in TFP and the heavy reliance on physical capital for decades impaired the region’s ability to sustain economic growth and to create decent jobs in the long run. The study recommends more government interventions in knowledge accumulation as a critical precondition for employment generation in developing countries.     

Demand competition and investment heterogeneity in industries based on systemic technologies: evidence from the US long-distance telecommunications services industry, 1984–1996

Industries based on systemic technologies are often characterized by a dynamically evolving market structure. The market structure that provides the context for firms’ investment choices itself evolves due to the feedback effect of firms’ investments. In such cases, analyses of investment-performance relationship, purporting to explain sustainable competitive advantages, should ideally account for the endogeneity of the determinants of market structure—technology, demand, and policy—and firms’ investment choices. This paper focuses on the endogeneity of the demand-side determinants of market structure and firms’ demand-side investments under the assumed conditions of constant technology and policy environment. In doing so it contradicts the extant depiction of the evolution of industrial market structure in the above context as primarily caused by the evolution of underlying technological system in response to firms’ endogenous technological investments that generate sustainable competitive advantage for the dominant firms. A dynamic evolutionary model of demand competition captures the competition in the downstream market for basic industry product and its complements in an industry based on systemic technology during its post-interoperability stage. A natural experiment drawn from the US Long-distance telecommunications services industry during 1984–1996 allows testing the hypotheses drawn from the above model in a panel data setting.     

Are economic growth and the variability of the business cycle related? Evidence from five European countries

We use a long series of annual data that span over 100 years to examine the relationship between output growth and its uncertainty in five European countries. Using the GARCH methodology to proxy uncertainty, we obtain two important results. First, more uncertainty about output leads to a higher rate of growth in three of the five countries. Second, output growth reduces its uncertainty in all countries except one. Our results are robust to alternative specifications and provide strong support to the recent emphasis by macroeconomists on the joint examination of economic growth and the variability of the business cycle.     

UK business cycle synchronization with Germany and the US: New evidence from time–frequency domain and structure of economic growth

This article uses a time–space approach to check the UK business cycle synchronization with Germany and the US. As a novelty, we consider the co-movements in terms of economic growth rate structure. In line with the existing studies, we discover that the UK business cycle is more synchronized with the US then with Germany, and that the co-movements have intensified lately. We also show that co-movements are reduced in terms of business cycle structure and are time–frequency-dependent. Finally, we point out that the UK business cycle became more synchronized with the US cycle given the contribution of investments and external balance to the real growth rate.     

Impact of social media on economic growth – evidence from social media

This article attempts to investigate the impact of social media (SM) on economic growth. Using information obtained from memberships to social networks, we find that SM has a negative and significant impact on economic growth. This provides evidence in favour of our hypothesis that SM increases the search costs for information and also increases the substitution effect from labour to leisure thereby producing a negative impact on growth.