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Appendix One: Unit root tests

The unit root tests used in this study are the Augmented Dickey-Fuller and Phillips-Perron tests. The optimal lag length has been chosen using Schwarz criterion.

All variables were tested first to ascertain whether a trend should be included in the unit root test. If we did not reject the unit root null hypothesis, we took the first difference of the series and reran the test excluding a time trend.

All variables were found to be I(1), except for the human capital index, the soil moisture deficit variable, and the MFP index which were all found to be stationary with drift and trend.

Appendix Table 1: Unit Root tests - levels
Variable: Lag Order t-statistic
MFP Index 0 -3.32*
Total R&D expenditures 0 -2.45
Public R&D expenditures 0 -2.52
Private R&D expenditures 0 -0.80
Wet 4 -3.57**
US Patents 0 1.25
Cumulated US Patents 1 1.42
Human Capital Index 1 -3.03**
Total R&D Stock (using 30% depreciation) 4 -1.13
Public R&D Stock (using 30% depreciation) 4 -3.60**
Private R&D Stock (using 30% depreciation) 1 -0.94
Extension (number of workers) 1 0.80

*= sig. at 10% level, **=sig. at 5% level, ***=sig. at 1% level

Appendix Table 2: Unit Root tests – first differences
Variable: Lag Order t-statistic
Total R&D expenditures 0 -7.82***
Public R&D expenditures 0 -7.96***
Private R&D expenditures 0 -8.63***
US Patents 0 -8.37***
Cumulated US Patents 0 -3.94***
Total R&D Stock (using 30% depreciation) 0 -3.73**
Private R&D Stock (using 30% depreciation) 0 -4.48***
Extension (number of workers) 0 -6.49***

*= sig. at 10% level, **=sig. at 5% level, ***=sig. at 1% level

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