ABSTRACT
The results clearly suggest that the effect of knowledge cost on TFP growth is negative, meaning that the higher the unit cost of generating new knowledge the lower the rate of growth of TFP. In quantitative terms, this impact ranges between –0.35 and –0.36, depending on the control variables included. If the unit cost of knowledge increases by one unit (corresponding to one million of 2005 constant PPP $), this leads to a 0.35-0.36 percentage point decrease in the growth rate of TFP. Consequently, given that between 1999 and 2010 the unit cost of knowledge for the average of the OECD countries in our sample increased by around 1.3 million of PPP $, this contributed to the reduction in the growth rate of TFP by approximately 0.42 percentage points. If the cost of knowledge remained unchanged at the average level from the pre-period (1985-1998), then ceteris paribus TFP would have grown on average between 1999 and 2010 at the rate of 1.2%.
