The Transatlantic Productivity Gap: Is R&D the Main Culprit?

The literature has pointed to different causes to explain the productivity gap between Europe and United States in the last decades. This paper tests the hypothesis that the lower European productivity performance in comparison with the US can be explained not only by a lower level of corporate RD however – using different estimation techniques - the R&D coefficients for the US firms always turn out to be significantly higher. To see to what extent these transatlantic differences may be related to the different sectoral structures in the US and the EU, we differentiated the analysis by sectors. The result is that both in manufacturing, services and high-tech sectors US firms are more efficient in translating their R&D investments into productivity increases.

[1]  R. Oaxaca.  Male-Female Wage Differentials in Urban Labor Markets , 1973 .

[2]  Alessandro Turrini,et al.  The EU-US Total Factor Productivity Gap: An Industry-Level Perspective , 2009 .

[3]  Bronwyn H Hall,et al.  Measuring the Returns to R&D: The Depreciation Problem , 2007 .

[4]  B. van Pottelsberghe de la Potterie,et al.  A Note on the Drivers of R&D Intensity , 2008 .

[5]  D. Jorgenson,et al.  Raising the Speed Limit: U.S. Economic Growth in the Information Age , 2000 .

[6]  Chenchuramaiah T. Bathala.  A Retrospective Look at the U.S. Productivity Growth Resurgence , 2008 .

[7]  A. Heshmati,et al.  The R&D and productivity relationship of Korean listed firms , 2011 .

[8]  W. Stefansky.  Rejecting Outliers in Factorial Designs , 1972 .

[9]  Laure Turner,et al.  Recent trends and structural breaks in the US and EU15 labour productivity growth , 2011 .

[10]  D. Bosworth,et al.  Technological Activity and Employment in a Panel of UK Firms , 2001 .

[11]  Mary O'Mahony,et al.  EU Productivity and Competitiveness: An Industry Perspective Can Europe Resume the Catching-up Process? , 2003 .

[12]  S. Kumbhakar,et al.  Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors , 2009, Journal of Productivity Analysis.

[13]  K. Pavitt.  Sectoral Patterns of Technical Change : Towards a Taxonomy and a Theory : Research Policy , 1984 .

[14]  G. Crespi,et al.  Information Technology, Organisational Change and Productivity , 2007 .

[15]  B. Verspagen.  R&D and productivity: A broad cross-section cross-country look , 1995 .

[16]  Alessandro Sterlacchini,et al.  Embodied technological change in supplier dominated firms , 1994 .

[17]  Jack E. Triplett,et al.  Productivity in the U.S. Services Sector: New Sources of Economic Growth , 2004 .

[18]  Bart Verspagen,et al.  R&D spillovers and productivity: Evidence from U.S. manufacturing microdata , 2000 .

[19]  C. Hulten,et al.  Growth Accounting When Technical Change is Embodied in Capital , 1992 .

[20]  K. Stiroh.  Information Technology and the U.S. Productivity Revival: What Do the Industry Data Say? , 2001 .

[21]  Per Krusell,et al.  Long-Run Implications of Investment-Specific Technological Change , 1995 .

[22]  Ben Jann,et al.  Review of Multilevel and Longitudinal Modeling Using Stata, Second Edition, by Sophia Rabe-Hesketh and Anders Skrondal , 2008 .

[23]  D. Harhoff.  R&D and Productivity in German Manufacturing Firms , 1998 .

[24]  Glenn L. Johnson,et al.  Productivity and Technical Change. , 1961 .

[25]  J. Olsen,et al.  The European Commission , 2020, The European Union.

[26]  A. Blinder.  Wage Discrimination: Reduced Form and Structural Estimates , 1973 .

[27]  Thomas Hatzichronoglou.  Revision of the High-Technology Sector and Product Classification , 1997 .

[28]  Xavier Fageda,et al.  Does privatization spur regulation? Evidence from the regulatory reform of European airports , 2010 .

[29]  Sectoral Productivity in the United States: Recent Developments and the Role of IT , 2007 .

[30]  I. Prucha,et al.  Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector , 1993 .

[31]  C. Freeman.  Economics of Industrial Innovation , 1975 .

[32]  M. Rogers.  R&D and productivity: using UK firm-level data to inform policy , 2010 .

[33]  Jacques Mairesse,et al.  Exploring the Relationship between R&D and Productivity in French Manufacturing Firms , 1992 .

[34]  Xavier Fageda,et al.  Similar problems, different solutions: comparing refuse collection in the Netherlands and Spain. , 2008, Public administration.

[35]  Jack E. Triplett,et al.  The Early 21st Century U.S. Productivity Expansion is Still in Services , 2007 .

[36]  Jacques Mairesse,et al.  Productivity and R&D at the Firm Level in French Manufacturing , 1983 .

[37]  Maria Laura Parisi,et al.  Productivity, innovation and R&D: Micro evidence for Italy , 2006 .

[38]  David B. Audretsch,et al.  Innovation in Large and Small Firms: An Empirical Analysis , 1988 .

[39]  Mariacristina Piva,et al.  Is Corporate R&D Investment in High-Tech Sectors More Effective? , 2009 .

[40]  Mary O'Mahony,et al.  Economic Growth in Europe: A Comparative Industry Perspective , 2010 .

[41]  J. Lane,et al.  Technology and the Demand for Skill:An Analysis of within and between Firm Differences , 2007, SSRN Electronic Journal.

[42]  Charles I. Jones,et al.  Sources of U.S. Economic Growth in a World of Ideas , 1998 .

[43]  Zvi Griliches,et al.  Issues in Assessing the Contribution of Research and Development to Productivity Growth , 1979 .

[44]  Marcel P. Timmer,et al.  IT in the European Union: Driving Productivity Divergence? , 2003 .

[45]  Stephen D. Oliner,et al.  The Resurgence of Growth in the Late 1990s: Is Information Technology the Story? , 2000 .

[46]  R. Baptista,et al.  Productivity Gaps Among European Regions , 2012 .

[47]  Zvi Griliches,et al.  Purchased Services, Outsourcing, Computers, and Productivity in Manufacturing , 1991 .

[48]  Manuela Pulina,et al.  Tourism and Exports as a means of Growth , 2009 .

[49]  H. Erken,et al.  Disentangling the R+D shortfall of the EU vis-a-vis the US , 2007 .

[50]  Zvi Griliches,et al.  Comparing Productivity Growth: An Exploration of French and U.S. Industrial and Firm Data , 1982 .

[51]  C. Hulten.  The Measurement of Capital , 1991 .

[52]  Z. Ács,et al.  Innovation and Small Firms , 1990 .

[53]  Maryann P. Feldman,et al.  R&D spillovers and recipient firm size , 1994 .

[54]  R. Gordon,et al.  Five Puzzles in the Behavior of Productivity, Investment, and Innovation , 2004 .

[55]  R. Gordon,et al.  Why did Europe’s productivity catch-up sputter out? a tale of tigers and tortoises , 2005 .

[56]  Almas Heshmati,et al.  On the relationship between innovation and performance: A sensitivity analysis , 2006 .

[57]  The 'embodiment' controversy: A review essay , 1998 .

[58]  F. Schiantarelli,et al.  Productivity, Innovation Creation and Absorption, and R&D: Micro Evidence for Italy , 2002 .

[59]  Dale W. Jorgenson,et al.  Information technology and the American growth resurgence , 2005 .

[60]  M. Nieto,et al.  Beyond formal R&D: Taking advantage of other sources of innovation in low- and medium-technology industries , 2009 .

[61]  IT AIN’T WHAT YOU DO IT’S THE WAY THAT YOU DO I.T.-TESTING EXPLANATIONS OF PRODUCTIVITY GROWTH USING U.S. AFFILIATES , 2005 .

[62]  J. Bernstein,et al.  Research and Development and Intraindustry Spillovers: an Empirical Application of Dynamic Duality , 1986 .

[63]  Xavier Fageda,et al.  Price rivalry in airline markets: a study of a successful strategy of a network carrier against a low-cost carrier , 2011 .

[64]  Ana Rincon,et al.  Productivity performance at the company level. , 2003 .

[65]  Marcel P. Timmer,et al.  Does information and communication technology drive EU-US productivity growth differentials? , 2005 .

[66]  Mark Rogers,et al.  R&D and Productivity in the UK: evidence from firm-level data in the 1990s , 2006 .

[67]  Human Capital Spillovers, Productivity and Regional Convergence in Spain , 2009 .

[68]  Bettina Peters,et al.  Firm Level Innovation and Productivity - is There a Common Story Across Countries? , 2003 .

[69]  Francesco Daveri,et al.  The New Economy in Europe (1992-2001) , 2002 .

[70]  Jiann-Chyuan Wang,et al.  R&D Productivity and the Spillover Effects of High-Tech Industry on the Traditional Manufacturing Sector: The Case of Taiwan , 2004 .

[71]  Dale W. Jorgenson,et al.  Productivity and Economic Growth , 1990 .

[72]  Stephen D. Oliner,et al.  Computers and Output Growth Revisited: How Big Is the Puzzle? , 1994 .

[73]  Sidney G. Winter,et al.  Schumpeterian Competition in Alternative Technological Regimes , 1983 .

[74]  John Van Reenen,et al.  It ain't what you do it's the way that you do IT , 2005 .

[75]  R. Solow.  We’d better watch out , 1987 .

[76]  W. Baumol.  The Free-Market Innovation Machine - Analyzing the Growth Miracle of Capitalism , 2002 .

[77]  E. Berndt,et al.  High-tech capital formation and economic performance in U.S. manufacturing industries : an exploratory analysis , 1992 .

[78]  F. E. Grubbs.  Procedures for Detecting Outlying Observations in Samples , 1969 .

[79]  Marco Vivarelli,et al.  R&D and productivity: testing sectoral peculiarities using micro data , 2009 .

[80]  M. King,et al.  INVESTMENT AND TECHNICAL PROGRESS , 1992 .

[81]  N. Shotts.  It ain't what you do.. , 1996, British Dental Journal.

[82]  Bruno Crépon,et al.  Research, Innovation, and Productivity: an Econometric Analysis at the Firm Level , 1998 .

[83]  K. Morrow,et al.  The EU-US total factor productivity gap : An industry perspective , 2008 .

[84]  Z. Hercowitz,et al.  The 'embodiment' controversy: A review essay , 1998 .

[85]  D. Jorgenson,et al.  A Retrospective Look at the U.S. Productivity Growth Resurgence , 2007 .

[86]  Günter Lang,et al.  Measuring the Returns of R&D , 2008 .

[87]  F. Crespi,et al.  Diversity in innovation and productivity in Europe , 2008 .

[88]  Jacques Mairesse,et al.  R&D Productivity: A Survey of Econometric Studies at the Firm Level , 1991 .

[89]  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS , 2008 .

[90]  Vicente Royuela,et al.  An analysis of the determinants in Economics and Business publications by Spanish universities between 1994 and 2004 , 2007, Scientometrics.

[91]  Daniel J. Wilson.  IT and Beyond: The Contribution of Heterogeneous Capital to Productivity , 2004 .

[92]  F. Bogliacino,et al.  Engines of growth. Innovation and productivity in industry groups , 2011 .

[93]  Mary O'Mahony,et al.  The productivity gap between Europe and the United States : Trends and causes , 2008 .

[94]  The Observational Implications of Schumpeterian Growth Theory , 1996 .

[95]  Dale W. Jorgenson,et al.  The Embodiment Hypothesis , 1966, Journal of Political Economy.

[96]  M. Stocker,et al.  Labour Productivity Developments in the Euro Area , 2006, SSRN Electronic Journal.

[97]  Giovanni Dosi,et al.  Opportunities, Incentives and the Collective Patterns of Technological Change , 1997 .

[98]  M. Vivarelli,et al.  One or Many Knowledge Production Functions? Mapping Innovative Activity Using Microdata , 2005, SSRN Electronic Journal.