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

38 Pages Posted: 28 Mar 2011

See all articles by Raquel Ortega-Argilés

Raquel Ortega-Argilés

University of Birmingham - Birmingham Business School, City REDI institute ; University of Groningen - Faculty of Economics and Business

Mariacristina Piva

Universita Cattolica del Sacro Cuore

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano; IZA Institute of Labor Economics

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Abstract

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 R&D investment, but also by a lower capacity to translate R&D investment into productivity gains. The proposed microeconometric estimates are based on a unique longitudinal database covering the period 1990-2008 and comprising 1,809 US and European companies for a total of 16,079 observations. Consistent with previous literature, we find robust evidence of a significant impact of R&D on productivity; 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.

Keywords: R&D, productivity, embodied technological change, US, EU

JEL Classification: O33

Suggested Citation

Ortega-Argilés, Raquel and Piva, Mariacristina and Vivarelli, Marco, The Transatlantic Productivity Gap: Is R&D the Main Culprit?. IZA Discussion Paper No. 5586. Available at SSRN: https://ssrn.com/abstract=1796541

Raquel Ortega-Argilés (Contact Author)

University of Birmingham - Birmingham Business School, City REDI institute ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

Mariacristina Piva

Universita Cattolica del Sacro Cuore ( email )

Via Emilia Parmense, 84
Piacenza
Italy

Marco Vivarelli

Universita Cattolica del Sacro Cuore, Milano ( email )

Largo Gemelli 1
Milano, 20123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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