INTERNATIONAL R-AND-D SPILLOVERS

A model is presented based on recent theories of economic growth that treat commercially oriented innovation efforts as a major engine of te chnological progress. We study the extent to which a country's total f actor productivity depends not only on domestic R & D capital but also on foreign R & D capital. Our estimates indicate that foreign R & D h as beneficial effects on domestic productivity, and that these are str onger the more open an economy is to foreign trade. Moreover, the esti mated rates of return on R & D are very high, both in terms of domesti c output and international spillovers.