Relating the Knowledge Production Function to Total Factor Productivity: An Endogenous Growth Puzzle

Full Text of this Article (PDF 216K)

Abstract: The knowledge production function is central to research and development–based growth models. This paper empirically investigates the knowledge production function and intertemporal spillover effects using cointegration techniques. Timeseries evidence suggests there are two long-run cointegrating relationships. The first captures a long-run knowledge production function; the second captures a long-run positive relationship between total factor productivity (TFP) and the knowledge stock. The results indicate that strong intertemporal knowledge spillovers are present and that the long-run impact of the knowledge stock on TFP is small. This evidence is interpreted in light of existing theoretical and empirical evidence on endogenous growth. [JEL O4, O3, C5]