Abstract
Research and development (R&D) activity has been widely cited as one of the key drivers of economic growth over several decades. This research note employs the Phillips and Sul (Econometrica 75(6):1771–1855, 2007; Econometrics 24(7):1153–1185, 2009) methodology to test for the convergence of R&D intensity across OECD countries spanning 145 years. We find evidence in favour of full convergence (i.e. convergence among all 20 countries) in R&D intensity. However, the club clustering procedure reveals that prior to World War II (WWII) the patterns of R&D intensity differ across countries where we identify one convergent club and one non-convergent club. These results suggest that the post-WWII period witnessed significant international R&D spillovers between countries, given that all countries converge to the same steady state. Alternatively, the pre-WWII period included countries where technology and innovation were lagging behind.
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Notes
See Islam (2003) for a review of the convergence literature.
If this hypothesis holds and \( \,\delta_{i} = \delta_{j} \) for \( i \ne j \), the model still allows for transitional periods in which \( \delta_{it} \ne \delta_{jt} \), thereby incorporating the possibility of transitional heterogeneity or even transitional divergence across i.
PS recommend estimating \( \hat{b} \) with robust standard errors since Eq. (1) may be weakly time dependant.
For instance, France and the UK have the highest pre-and-post-WWII mean R&D intensity, followed closely by Netherlands, Finland, Switzerland, and Canada—all of which make up the non-converging club in our pre-WWII sample.
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Awaworyi Churchill, S., Inekwe, J. & Ivanovski, K. Convergence of R&D intensity in OECD countries: evidence since 1870. Empir Econ 59, 295–306 (2020). https://doi.org/10.1007/s00181-019-01628-1
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DOI: https://doi.org/10.1007/s00181-019-01628-1