Sectoral productivity growth and R&D spillovers in the Netherlands

This paper assesses empirically whether R&D spillovers are important and whether they originate from domestic or foreign activities. Data for 11 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. It is found that both domestic and foreign R&D are significant for the Dutch economy. The elasticity of total factor productivity with respect to R&D is approximately 37% for R by a sector, 15% for R&D by other Dutch sectors and 3% for R&D by foreign sectors. The findings suggest moreover that more R&D speeds up the adoption of foreign technologies. Thus, even for a small open economy as the Netherlands, promoting investment in R&D is appropriate as it both stimulates adoption and generate spillovers.