The Growth of Chinese R&D and Innovation

39 Pages Posted: 31 Jul 2019

See all articles by Xiaodan Gao

Xiaodan Gao

National University of Singapore

Jake Zhao

Peking University - HSBC School of Business

Date Written: February 28, 2019

Abstract

China's GDP has grown at a tremendous rate over the last 40 years, but its total R&D expenditure has grown even more. We construct a model of firm dynamics which produces endogenous increases in R&D and productivity. We then take the model to the data and find that R&D expenditure as a percentage of GDP should have plateaued in the absence of government incentives. Also, Chinese firm productivity would have lagged more than 10 years behind without foreign technology spillovers. Finally, we assess the efficacy of various R&D policies. Giving greater R&D subsidies to less productive firms is more efficient, while giving greater subsidies to firms with lower R&D expenditures is not as efficient.

Keywords: R&D investment, economic growth, knowledge spillover, financial frictions

JEL Classification: E22, G32, O3, L11

Suggested Citation

Gao, Xiaodan and Zhao, Jake, The Growth of Chinese R&D and Innovation (February 28, 2019). Available at SSRN: https://ssrn.com/abstract=3427933 or http://dx.doi.org/10.2139/ssrn.3427933

Xiaodan Gao

National University of Singapore ( email )

15 Kent Ridge Drive
Mochtar Riady Building, #6-50
Singapore, Singapore 119245
Singapore
(+65)66013543 (Phone)
(+65)67795059 (Fax)

Jake Zhao (Contact Author)

Peking University - HSBC School of Business ( email )

University Town
Shenzhen, 518055
China

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