Richard Nahuis

Sectoral Productivity Growth and R&D Spillovers in the Netherlands

This paper assesses empirically whether R&D spillovers are important and whether they originate from domestic or foreign activities. Data for eleven sectors are used to explain the impact on total factor productivity of R&D by the sector itself, by other Dutch sectors and by foreign sectors. We find that both domestic and foreign R&D are significant for the Dutch economy. The elasticity of total factor productivity with respect to R&D is approximately 37% for R&D by a sector, 15% for R&D by other Dutch sectors and 3% for R&D by foreign sectors. Our findings suggest moreover that more R&D speeds up the adoption of foreign technologies. Thus, even for a small open economy as the Netherlands, promoting investment in R&D is appropriate as it both stimulates adoption and generates spillovers.

The Skill Premium, Technological Change and Appropriability

In the US the skill premium and the non-production/production wage differential increased strongly from the late 1970s onwards.Skill-biased technological change is now generally seen as the dominant explanation, which calls for theories to explain the bias.This paper shows that the increased supply of skill - which is usually seen as countervailing the rise in skill premiums - can actually cause rising skill premiums.The analysis starts from an R&D-driven endogenous growth model.Our key assumption is that skilled labour is employed in non-production activities that both generate and use knowledge inputs.If firms can sufficiently appropriate the intertemporal returns from these activities, skill premiums may rise with the supply of skilled labour.The degree of appropriability is endogenous and rises with the supply of skills.As a result, the skill premium first falls and then increases when skilled labour supply rises.Simultaneously, patents per dollar spent on R&D fall.

A general purpose Technology Explains the Solow Paradox and Wage Inequality

We analyze the consequences of a general purpose technology (GPT) on output, productivity, and wages of skilled and unskilled workers. Our endogenous growth model matches three key empirical facts during the 1980s and 1990s: an increasing skill premium, a fall in the real wages of unskilled workers and a slowing down of economic growth after the introduction of a GPT.

R&D Spillovers and Growth: Specialization Matters

We explore the relationship between openness and growth by taking a closer look at trade-related knowledge spillovers at the industry level. First, we estimate the relation between sectoral R&D expenditures, trade-related spillovers, and growth. Next, we incorporate these R&D linkages in a computable general-equilibrium model for the world economy. We simulate trade liberalization in the model with R&D spillovers and compare the effects on GDP in different regions with a non-R&D-based model simulation. We find that the GDP effects of trade liberalization are magnified considerably by R&D spillovers for some regions-notably Japan and Southeast Asia. In other regions, such as China, the additional GDP effects are modest. These findings can be traced back to changing specialization and import patterns. Copyright 2005 International Monetary Fund.

Vested interest and resistance to technology adoption

Employed technologies differ vastly across countries. Within countries many technologies that would obviously improve firms’ efficiency are not adopted. This paper explains these observations by emphasizing that a new technology positively affects workers by lowering prices and increasing their real income, but also negatively by costs of getting acquainted with the new technology. If the costs of adoption for workers exceed the benefits, they will aim at keeping the old technology in place. We formalise the trade-off in a simple OLG model with majority voting. Age groups that lose from adopting resist. Successful resistance blocks adoption and hence lowers growth. Finally, we analyse the effects of tougher competition. Provided that consumption and leisure are relatively good substitutes, tougher competition mitigates resistance and thus favours economic growth as it increases the share of the rent associated with the new technology that is being captured by the workers.

On labour standards and free trade

We investigate the effectiveness and efficiency of alternative measures to increase standards in low-income countries in a two-country framework where (a) trade and standards in low-income countries are negatively related, and (b) free trade is not longer optimal for the high-income country due to a negative psychological externality that low standards in low-income countries exert. We find that any uncoordinated, unilateral action by the high-income country to decrease the psychological externality is dominated by coordinated action; both with respect to the psychological externality as with respect to the welfare consequences for both countries. Coordination is also shown to be feasible and incentive compatible, provided that standards are objectively verifiable. (JEL D62, F13)

Human Capital, R&D, Productivity Growth and Assimilation of Technologies in the Netherlands

This paper analyses technological change in the Dutch economy at a sectoral level. Total factor productivity is explained by human capital, R&D accumulation (knowledge) and spillovers of R&D in other sectors and other countries. First, we find no evidence that human capital explains TFP growth. Second, R&D and spillovers from R&D, both from domestic and foreign R&D sources, are important. The TFP-elasticity of R&D is about 0.35, domestic spillovers from R&D have a TFP-elasticity of about.14, and foreign spillovers have a TFP-elasticity of.03. Third, we look at the role of human capital in the process of assimilation and diffusion of technologies. Also here, we cannot find evidence that human capital is important for the assimilation of technologies. Empirical evidence favours innovation driven economic growth, rather than human capital based growth.

Optimal Product Variety, Scale Effects, and Growth

We analyze the social optimality of growth and product variety in a model of endogenous growth. The model contains two sectors, one assembly sector producing a homogenous consumption good, and one intermediate goods sector producing a differentiated input used in the assembly sector. Growth results from R&D performed by firms in the intermediate goods sector aimed at quality improvement. We disentangle three effects associated with increased variety, namely (i) a productivity effect, (ii) a business stealing effect, and (iii) a growth effect. The market provides too little variety and suboptimally high growth if the productivity effect of variety is large relative to the market power of intermediate goods producers. If varieties are not productive, the market provides too low a rate of growth, whereas variety may be too low as well.