Sectoral productivity growth and R&D spillovers in the Netherlands

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 domestic R&D is 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 and 18% for R&D by other Dutch sectors. Also foreign R&D has a significant impact. The elasticity for Dutch manufacturing is 7½%. The (indirect) effect of domestic R&D is therefore larger than that of foreign R&D, largely reflecting existing trade patterns. 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.