Rates of Return to R&D Investment in the Philippines

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This paper estimates the rate of return in investment in three major sectors: primary sectors which include manufacturing, construction and utilities, industry sectors which include construction and utilities and service sectors which include transportation, trade and finance. The estimates are made utilizing the production function approach. The rate of return (ROR) to Research & Development (R&D) computed for these sectors are compared to the ROR to other investment such as physical capital including machineries, building and equipment. Results show that ROR of R&D for both primary and service sectors are higher than the ROR for other investments. However, when the inter-industry linkages are accounted for, the spillover effects are not significant. These cannot be generalized in the industry sector as spillover effects are practically zero.