Using panel VAR to analyze international knowledge spillovers

Technology diffusion often plays a critical role in models of trade and economic growth. Most existing empirical tests for international technology spillovers suggest some role for spillovers in explaining productivity growth. It has been relatively difficult, however, to identify separate roles for...

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Bibliographic Details
Published in:Review of international economics 2019-11, Vol.27 (5), p.1633-1660
Main Authors: Hovhannisyan, Nune, Sedgley, Norman
Format: Article
Language:English
Subjects:
Agglomeration
Economic growth
Economic models
Manufacturing
Panel data
Productivity
R&D
Research & development
Research & development expenditures
Spillover effect
Technology
Value added
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Summary:Technology diffusion often plays a critical role in models of trade and economic growth. Most existing empirical tests for international technology spillovers suggest some role for spillovers in explaining productivity growth. It has been relatively difficult, however, to identify separate roles for the direct and indirect channels of knowledge spillovers. The influence of these channels is often confounded owing to the focus on total‐factor productivity (TFP) and R&D spending within a cross‐section or panel data setting. This paper employs an alternative methodology to investigate the role of direct knowledge spillovers. Using citation‐weighted domestic patents, citation‐weighted foreign patents and value added for 14 U.S. manufacturing industries over the period 1977 to 2004 a panel VAR methodology is employed to investigate the dynamic role of direct and indirect knowledge spillovers. Evidence for the role of the direct knowledge spillovers channel is found—an increase in citation‐weighted patents abroad directly increases the measure of domestic citation‐weighted patents, after accounting for the influence of productivity/value added. The role of foreign innovative activity, however, is small relative to the role of U.S. innovative activity in explaining the dynamics of industry value added.
ISSN:0965-7576
1467-9396
DOI:10.1111/roie.12438