Publication: Innovation Shortfalls
Date
2007-07
ISSN
Published
2007-07
Author(s)
Abstract
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.
Citation
“Maloney, William; Rodríguez-Clare, Andrés. 2007. Innovation Shortfalls. Policy Research Working Paper; No. 4283. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/363eb896-6cc9-5cae-ad69-d852cad764ae License: CC BY 3.0 IGO.”
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