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Th e objective of the paper is to quantify the eff ect of the R&D investments on agricultural productivity in the Czech Republic using the co-integration analysis. Th e eff ect of the R&D investments is measured by a knowledge stock constructed using a gamma distribution with lags ranging from 7 to 15 years. Th e relationship between the total factor productivity in agriculture, the domestic knowledge stock and the foreign R&D spillovers approximated by the imports of agricultural technologies is examined using an error correction model. Whereas the estimates confi rm that domestic research plays a positive role in agricultural productivity, the results for the foreign R&D spillovers are rather weak. Furthermore, there is little evidence that either length of time or the functional form of weights plays a major role in assessing the dependence of the productivity on R&D investments; however, the models with the knowledge distribution lags longer than 7 years perform better.

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Abstract:The paper investigates how results obtained with standard CGE models can be improved by incorporating the effects of R&D activity in a recursively-dynamic CGE model built for the economy of the Czech Republic. The main objective of the paper is to quantify the impact of R&D activity on the long-term economic growth of the Czech Republic within the recursively dynamic CGE framework. The effect of R&D investment is modelled via the accumulation of knowledge that is treated as a specifi c production factor.The main fi ndings show that knowledge accumulation can contribute to higher economic growth, but the impact of the dynamisation in the CGE model is very low. However, in terms of structural changes in the economy, the omission of knowledge capitalization might underestimate the tertiary sector in the longer run. The paper also investigates the effi ciency of R&D investment and concludes that in the longer run, investment in capital goods is more effi cient in achieving higher economic growth. In the concluding chapter, related factors that may improve the impact of knowledge in the CGE model are discussed.