Do Higher Per Capita Incomes Lead to More R&D Expenditure?

This paper analyzes empirically the relationship between R&D and growth. The estimated elasticity of per capita R&D expenditures with respect to domestic per capita incomes lies between 1.81 and 2.93 for the ten OECDcountries studied, whereas the elasticity of R&D with respect to foreign demand lies between 0.43 and 0.68. The paper introduces a “standard” GDP growth accounting equation where current productivity is a function ofprevious R&D. The results indicate that OLS estimates of spillovers from R&D have an upward bias of more than 40%.