39 payments and receipts provide empirical evidence that domestic innovation and/or technological adaptation is important for long-term economic growth<sup>45</sup> .

The results of the above mentioned regressions are presented in Tables 2 and 2a. Table 2b presents the summary statistics of the innovation variables, while Table 2c is the table of correlation coefficients between the innovation variables. Looking at the estimated coefficients of the growth of capital and labor in Table 2, we see they are positive and highly statistically significant. In addition, as seen in the previous section, the sum of the coefficients is consistently around 0.8, indicating aggregate production function with decreasing returns to scale technology. If we assume constant returns to scale, then the capital share of national income is estimated be 20 percent as seen from the estimated coefficients of the growth of capital per worker in Table 2a. As noted above, there is recurring evidence of diminishing returns to human capital accumulation as indicated by the significant positive coefficient of the human capital stock variable _HC15_ , and the significant negative coefficient of the square of _HC15_ . Also, the positive but statistically insignificant coefficient of the educational quality variable also emerges in both sets of regressions. With regard to the ICT variable ‘phone’, the estimated coefficient is consistently positive and highly statistically significant.

The first innovation variable that we consider is the logarithm of the annual number of patents granted by the USPTO to a resident of a specific country (Reg 2.1 and Reg 2a.1). As we saw earlier, the estimated coefficient of the patents variable is positive and highly statistically significant. The results indicate that a one percent increase in the number of USPTO patents tends to increase average annual economic growth by 0.19 percentage point, and increase output per worker by 0.20 percentage point. We obtain similar results by using the logarithm of the annual number of _utility_ patents granted by the USPTO to a resident of a specific country to represent domestic innovation. The statistically significant positive coefficient of 0.18 indicates that a one percent increase in the number of utility patents is associated with a 0.18 percentage point increase in annual growth of real GDP and also growth of output per worker. It is shown in Appendix B that we attempted to account for the differences in the quality of patents by using utility patent citation data available from Jaffe and Trajtenberg (2002). However, we obtained results that were theoretically implausible and have decided to exploit the information contained in the citation data at a later date.

The next domestic innovation variable that we examine is the logarithm of the annual number of published scientific and technical journal articles (Reg 2.3 and Reg 2a.3). We see that the estimated coefficient is positive and statistically significant and the value of 0.22 indicates that a one percent increase in the number of journal article tends

> 45 We also take a look at two other indicators, namely log of the ratio of gross foreign direct investment to GDP, and log of the manufactures trade share in GDP.  However, as presented in Appendix B, the estimated coefficients for these 2 variables were statistically not significant.