How the Quality of Institutions Affects Technological Deepening in Developing Countries
This paper assesses the effect of institutional quality on research and development (R&D) expenditures in developing countries. The paper finds that the risk of expropriation and the rule of law are correlated with R&D expenditures. Since b...
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| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/04/2873559/quality-institutions-affects-technological-deepening-developing-countries http://hdl.handle.net/10986/19670 |
| Summary: | This paper assesses the effect of
institutional quality on research and development (R&D)
expenditures in developing countries. The paper finds that
the risk of expropriation and the rule of law are correlated
with R&D expenditures. Since both institutional
variables increase as institutional quality improves (i.e.,
as risk of expropriation decreases and rule of law
improves), this suggests that stronger institutions
encourage greater R&D expenditures. The result for the
risk of expropriation is more highly significant and far
more robust than the result for the 'rule of law'.
Although R&D is not the primary way that developing
countries gain access to technology, this result is
interesting for at least two reasons. First, R&D might
encourage technological deepening better than other methods
that developing countries use to gain access to technology
(e.g., through foreign direct investment (FDI) or capital
goods imports). Second, past work has shown that another
important way that developing countries gain access to
technology, through FDI, is also positively correlated with
institutional quality (i.e., as institutional quality
improves, FDI increases). |
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