This paper, authored by David T. Coe and Elhanan Helpman, explores the impact of a country's research and development (R&D) capital stock on its total factor productivity (TFP). The authors estimate the effects of both domestic and foreign R&D capital stocks on TFP, using data from 22 countries over the period 1970-1990. They find that both domestic and foreign R&D capital stocks significantly affect TFP, with foreign R&D having particularly large effects on smaller countries. The study also reveals that about one-quarter of the benefits of R&D investment in the seven largest economies are enjoyed by their trade partners. The theoretical framework underlying the empirical analysis is discussed, and the data sources and construction methods are detailed. The results highlight the importance of international trade and foreign R&D in driving productivity growth.This paper, authored by David T. Coe and Elhanan Helpman, explores the impact of a country's research and development (R&D) capital stock on its total factor productivity (TFP). The authors estimate the effects of both domestic and foreign R&D capital stocks on TFP, using data from 22 countries over the period 1970-1990. They find that both domestic and foreign R&D capital stocks significantly affect TFP, with foreign R&D having particularly large effects on smaller countries. The study also reveals that about one-quarter of the benefits of R&D investment in the seven largest economies are enjoyed by their trade partners. The theoretical framework underlying the empirical analysis is discussed, and the data sources and construction methods are detailed. The results highlight the importance of international trade and foreign R&D in driving productivity growth.