International strongRstrongD Spillovers and Institutions - IMF.pdf

WP/08/ 104 International RD Spillovers and Institutions David T. Coe, Elhanan Helpman, and Alexander W. Hoffmaister © 2008 International Monetary Fund WP/08/ 104 IMF Working Paper Asia and Pacific and European Departments International RD Spillovers and Institutions Prepared by David T. Coe, Elhanan Helpman, and Alexander W. Hoffmaister1 Authorized for distribution by David T. Coe April 2008 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. The empirical analysis in “International RD Spillovers” (Coe and Helpman, 1995) is first revisited by applying modern panel cointegration estimation techniques to an expanded data set that we have constructed for the purpose of this study. The new estimates confirm the key results reported in Coe and Helpman about the impact of domestic and foreign RD capital stocks on TFP. In addition, we show that domestic and foreign RD capital stocks have measurable impacts on TFP even after controlling for the impact of human capital. Furthermore, we extend the analysis to include institutional variables, such as legal origin and patent protection, in order to allow for parameter heterogeneity based on a country’s institutional characteristics. The resu