Abstract
This paper uncovers linkages between oil price uncertainty, total factor productivity (TFP) growth, and critical indicators of knowledge production and spillovers. It contributes to the literature by investigating the effects of oil price volatility on TFP growth, controlling for two different channels for TFP growth; benefits from the quality of the national innovation system and from adopting new technologies. We use an unbalanced panel for 28 European Union countries for the period from 1990 to 2018. We find that oil price uncertainty has a negative and statistically significant effect on TFP growth, even after we control for technological advancements and the effects of globalization. We also find that the scale of research and innovation and international trade are positive contributors to TFP growth.
Highlights
Growth, and critical indicators of knowledge production and spillovers
We investigate the effects of oil price uncertainty on total factor productivity growth, and in doing so, we control for two different channels for TFP growth—benefits from the quality of the national innovation system and from adopting new technologies
Consistent with the earlier literature, we find that oil price uncertainty has a negative and statistically significant effect on TFP growth even after we control for technological advancements and the effects of globalization
Summary
Growth, and critical indicators of knowledge production and spillovers It contributes to the literature by investigating the effects of oil price volatility on TFP growth, controlling for two different channels for TFP growth; benefits from the quality of the national innovation system and from adopting new technologies. Introduction and Total Factor Productivity: We use recent advances in macroeconometrics and financial econometrics to investigate the macroeconomic effects of oil price shocks and oil price uncertainty. We investigate the effects of oil price uncertainty on total factor productivity growth, and in doing so, we control for two different channels for TFP growth—benefits from the quality of the national innovation system and from adopting new technologies. According to the Solow growth model [1], the aggregate value added (or GDP) growth can be decomposed into contributions from the aggregate capital input, K, aggregate labour input, L, and aggregate total factor productivity, TFP, as follows: Evidence from the European Union
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