Innovation Shortfalls

20 Pages Posted: 22 Oct 2007

See all articles by William F. Maloney

William F. Maloney

World Bank - Poverty and Economic Management Unit; IZA Institute of Labor Economics; World Bank - Development Research Group (DECRG)

Andres Rodriguez-Clare

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

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Abstract

There is a common perception that low productivity or low growth is due to what can be called an innovation shortfall, usually identified as a low rate of investment in R&D. The problem with this analysis is that it fails to see that a low R&D investment rate may be appropriate given the economy's pattern of specialization, or may be just one manifestation of impediments to accumulation more generally. This paper first shows a simple way to estimate the R&D gap that can be explained by a country's specialization pattern, illustrating it for the case of Chile. Second, we show how a calibrated model can be used to determine the R&D gap that should be expected given a country's investment in physical and human capital. If the actual R&D gap is above this expected gap, then one can say that the country suffers from a true innovation shortfall.

Suggested Citation

Maloney, William F. and Rodríguez-Clare, Andrés, Innovation Shortfalls. Review of Development Economics, Vol. 11, No. 4, pp. 665-684, November 2007. Available at SSRN: https://ssrn.com/abstract=1023235 or http://dx.doi.org/10.1111/j.1467-9361.2007.00422.x

William F. Maloney (Contact Author)

World Bank - Poverty and Economic Management Unit ( email )

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IZA Institute of Labor Economics

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World Bank - Development Research Group (DECRG)

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Andrés Rodríguez-Clare

Pennsylvania State University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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