Productivity effects of trade and product innovations: an empirical analysis for 13 OECD countries

Abstract

This article distinguishes two sources of productivity increases, namely product/process innovations and trade innovations. An empirical analysis for 13 OECD countries shows that product/process innovations, represented by aggregated investments in Research and Development (R&D), are major determinants for productivity growth in large industrial countries, whereas trade innovations, represented by export intensity, seem to contribute most to productivity in trade-oriented economies. These trade innovations relate to the ability to reduce transaction costs so that these trading nations specialize in the organization of production in this era of globalization where the production chain is split up in more and more component parts.

Keywords:

• total factor productivity
• R&D
• trade innovations
• transaction costs
• export intensity

JEL Classification:

• F10
• F43
• O47

View correction statement:

Erratum

Notes

1. For a summary overview of the methodology and construction of the EU KLEMS database, see O’Mahony and Timmer (2009).

2. This variable is provided by the UNESCO Institute for Statistics.