Description: Innovation Shortfalls

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Innovation Shortfalls

There is a common perception that low productivity or low growth is due to what can be called an "innovation shortfall," usually identified as a low rate of investment in research and development (R&D) when compared with some high inn...

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Bibliographic Details
Main Authors:	Maloney, William, Rodríguez-Clare, Andrés
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	AFFILIATED ORGANIZATIONS AVERAGE PRODUCTIVITY BENCHMARKING CAPITAL ACCUMULATION CAPITAL STOCK CAPITAL-LABOR CAPITAL-LABOR RATIO CAPITAL-OUTPUT RATIO COMPARATIVE ADVANTAGE CONSTANT RATE COST OF R&AMP;D DEVELOPMENT ECONOMICS DISCOUNT RATE DOMESTIC FIRMS DOMESTIC R&AMP;D ECONOMIC GROWTH ECONOMIC STRUCTURE EQUILIBRIUM EQUILIBRIUM ANALYSIS EXTERNALITIES EXTERNALITY FACTORS OF PRODUCTION FREE FLOW FUTURE RESEARCH GDP GROWTH DIAGNOSTICS GROWTH RATE HUMAN CAPITAL INCOME INCOME DIFFERENCES INCOME LEVELS INCOME TAXES INCREASE IN LABOR INTEREST RATE INTERNATIONAL SPILLOVERS INTERNATIONAL TRADE INVESTMENT GOODS INVESTMENT IN RESEARCH INVESTMENT LEVELS INVESTMENT RATE INVESTMENT RATES KNOWLEDGE CAPITAL KNOWLEDGE SPILLOVERS LABOR FORCE LABOR PRODUCTIVITY LATIN AMERICAN LDCS MARKET FAILURES NATIONAL ECONOMY NATURAL RESOURCES NEOCLASSICAL MODEL OPEN ECONOMY OPTIMIZATION PRIVATE RATE PRIVATE RATES PRODUCTION FUNCTION PRODUCTIVITY PRODUCTIVITY GROWTH R&D R&D INTENSITIES R&D INTENSITY R&D INVESTMENT R&D POLICY R&D SPENDING R&D SPILLOVERS R&D TAX RATE OF INVESTMENT RATE OF RETURN RATE OF RETURN TO CAPITAL RATES OF RETURN REAL INTEREST RATE RELATIONSHIP BETWEEN R&AMP;D SHADOW PRICES SOUTH AMERICA STATE EQUILIBRIUM TAX POLICY TAX RATE TAX RATES TECHNOLOGICAL CHANGE TFP TOTAL LABOR FORCE TOTAL OUTPUT TRADE BARRIERS TRADE THEORY VALUE ADDED WAGES
Online Access:	http://documents.worldbank.org/curated/en/2007/07/7964756/innovation-shortfalls http://hdl.handle.net/10986/7470

Description
Summary:	There is a common perception that low productivity or low growth is due to what can be called an "innovation shortfall," usually identified as a low rate of investment in research and development (R&D) when compared with some high innovation countries. The usual reaction to this perceived problem is to call for increases in R&D investment rates, usually specifying a target that can be as high as 3 percent of GDP. The problem with this analysis is that it fails to see that a low R&D investment rate may be appropriate given the economy's pattern of specialization, or may be just one manifestation of more general problems that impede accumulation of all kinds of capital. How can we know when a country suffers from an innovation shortfall above and beyond the ones that should be expected given the country's specialization and accumulation patterns? This is the question the authors tackle in this paper. First, they show a simple way to estimate the R&D gap that can be explained by a country's specialization pattern, illustrating it for the case of Chile. For this country they find that although its specialization in natural-resource-intensive sectors explains part of its R&D gap, a significant shortfall remains. Second, the authors show how a calibrated model can be used to determine the R&D gap that should be expected given a country's investment in physical and human capital. If the actual R&D gap is above this expected gap, then one can say that the country suffers from a true innovation shortfall.