International R&D Spillovers and Labor Productivity in Africa

Abstract

This chapter employs dynamic ordinary least squares and panel co-integration to estimate advanced countries’ R&D spillover effects on labor productivity in 28 Sub-Saharan African countries over the period 1992–2011. Estimation results show that African countries that import and receive development aid (technical and non-technical) from advanced countries experience an increase in labor productivity, suggesting that trade and aid are transmitters of foreign R&D. However, the extent to which labor productivity responds to R&D spillovers varies based on the country of origin, where spillovers from the United States have a greater impact compared to those from other advanced countries.

Appendix

Weighted Foreign R&D Spillovers

The construction of import or development aid weighted foreign R&D follows the method developed by Coe and Helpman (1995). For example, in the case of import weights, this is done by measuring foreign R&D capital stock of a Sub-Saharan country i as a weighted average of R&D capital stock of an OECD trading partner j, where the weights are bilateral import share of country i as follows:

$$ {S}_i^{f-biw}=\sum_{j\ne i}{w}_{ij}{S}_j^d $$

$$ {w}_{ij}=\frac{M_{ij}}{\sum_{j\ne i}{M}_{ij}},\sum_{j\ne i}{w}_{ij}=1 $$

where, M _ij is country i’s imports of goods and services from country j. ${S}_j^d$ is the R&D capital stock of trading partner j. Foreign R&D spillovers through technical cooperation ODA and non-technical cooperation ODA are constructed using same approach as shown above.

Table A.12.1 List of Sub-Saharan African countries

Table A.12.2 Correlation matric for selected variables, 1992–2011

Table A.12.3 Average elasticities of labor productivity in SSA countries with respect to G7 countries’ R&D spillovers via trade and development aid (1995, 2003, and 2011): Based on regressions (1), (4), and (7) of Table 12.5