• O30;
  • O40
  • endogenous growth;
  • Schumpeterian growth model;
  • semi-endo-genous growth model;
  • TFP;
  • R&D;
  • product proliferation;
  • time-series test

This paper argues that long-run trends in R&D and TFP are more supportive of fully endogenous “Schumpeterian” growth theory than they are of semi-endogenous growth theory. The distinctive prediction of semi-endogenous theory that sustained TFP growth requires sustained growth of R&D input is not supported by co-integration tests and forecasting exercises, as TFP growth has been stationary even though the growth rate of R&D input has fallen three-fold since the early 1950s. In contrast, the prediction of Schumpeterian theory that sustained TFP growth requires a sustained fraction of GDP to be spent on R&D is not contradicted by similar tests.