Testing R&D‐Based Endogenous Growth Models*

Abstract

AbstractThis study examines US productivity growth through the lens of R&D‐based growth models. A general R&D‐based model, nesting different model varieties, is developed. These varieties are tested using a novel cointegrating relationship and US data for the period 1953–2018. The results provide evidence against the widely used fully endogenous variety and support for other varieties including the semi‐endogenous variety. Further, the results are systematically consistent with the presence of fishing‐out effects in knowledge production, implying that productivity‐enhancing innovations become increasingly harder to achieve as technologies become more advanced. Forecasts suggest that the US productivity growth slowdown continues over the coming decades.