Human Resource Accounting

Intra- and Inter-Industry Productivity Spillovers in OECD Manufacturing: A Spatial Econometric Perspective

Harald Badinger Department of Economics, Wirtschaftsuniversität Wien

Peter Egger Department of Economics, ETH Zürich

February 2010

Abstract We adopt a spatial econometric approach to estimate intra- and inter-industry spillovers in total factor productivity transmitted through input-output relations in a sample of 13 OECD countries and 15 manufacturing industries. Both R&D spillovers as well as remainder, input-output-related linkage effects are accounted for, the latter of which we model by a spatial regressive error process. We find that R&D spillovers occur both horizontally and vertically, whereas remainder spillovers (i.e., ones through unobservable variables) are primarily of intraindustry type. Notably, these intra-industry remainder spillovers turn out economically more significant than R&D spillovers. JEL Code.: L60, C21, F14 Keywords: Intra-Industry Spillovers, Inter-Industry Spillovers, Productivity, Spatial Econometrics, Research and Development

“the transmission of technological change may also take the form of a circular process. Under such a configuration technological improvements have a magnified impact. … All these repercussions – vertical or triangular – form part of a response mechanism that contributes to technological advancement” (Balassa, 1961, p. 150) I. Introduction The process of economic integration after World War II has markedly intensified the interdependence of economic systems at all levels of aggregation – among firms, industries, regions, and even countries. The removal of barriers to transport and trade, improvements of infrastructure facilities, better availability of high-quality information and communication technologies, and access to new modes of specialization have induced sizeable growth in trade in final goods, foreign direct investment, and trade in components and intermediate goods (also referred to...