Sectoral Productivity Growth and R&D Spillovers in the Netherlands

This paper assesses empirically whether R&D spillovers are important and whether they originate from domestic or foreign activities. Data for eleven sectors are used to explain the impact on total factor productivity of R&D by the sector itself, by other Dutch sectors and by foreign sectors. We find that both domestic and foreign R&D are significant for the Dutch economy. The elasticity of total factor productivity with respect to R&D is approximately 35% for R&D by the sector itself, 18% for R&D by other Dutch sectors and 1½% for R&D by foreign sectors. Our findings also suggest that more R&D speeds up the absorption of foreign technologies. These results are confirmed in an analysis where we look at manufacturing and services separately. We find one difference: R&D in the service sectors helps to absorb foreign technologies, whereas R&D in manufacturing does not.