International R&D spillovers between US and Japanese R&D intensive sectors

This paper empirically investigates bilateral spillovers between the U.S. and Japan. International spillovers exist from the U.S. to Japan, but not in the converse direction. In the short-run, the U.S. spillover reduces Japanese average variable cost, and causes production to become more physical and R&D capital intensive. In the long-run, the spillover reduces physical capital intensity, but production becomes more R&D intensive. In both runs Japanese unskilled labor intensity is reduced. The U.S. R&D spillover accounts for around 46% of Japanese productivity growth, and the international social rate of return to U.S. R&D capital is twice its private return. (C) 1998 Elsevier Science B.V.