Openness, growth and R&D spillovers: uncovering the missing link?

We examine the trade-related diffusion of R&D in three steps.

First, using OECD and UNESCO data we provide an overview of global R&D expenditures. Second, we estimate the relation between sectoral R&D expenditures and growth. Finally, these R&D linkages are incorporated in WorldScan: a dynamic applied general equilibrium model for the world economy.

We simulate trade liberalisation and analyse the effects on GDP in different regions. We find that the GDP effects of trade liberalisation are magnified considerably for some regions, notably Japan and South-East Asia, where for others, for example China and Sub-Saharan Africa, the GDP effects are not blown up at all. These findings can be traced back to changing specialization patterns and changing import patterns. A region either specialises in R&D-intensive sectors or imports R&D-intensive goods. Some regions import the knowledge-intensive goods from knowledge-poor regions. Such a 'double unfortunate' trade and production pattern explains the results for Sub-Saharan Africa and China.