AUSTRALIA INDUSTRIAL RESEARCH-AND-DEVELOPMENT EXPENDITURE AND FOREIGN-TRADE

The link between R&D intensity and trade performance for the Australian manufacturing sector in 1980-81 is investigated. R&D intensity is also subdivided into basic and applied versus experimental development R&D, as well as self-financed versus externally financed R&D. Box-Cox regression is used to estimate revealed comparative advantage, export and import intensity equations without a priori imposition of a particular functional form. Australia has a revealed comparative disadvantage in R&D intensive manufacturing sectors, but the effect of R&D intensity variables on export intensity is positive. This asymmetry is an indication of the problems facing the country in developing non-traditional comparative advantages. Export equation estimates are only statistically significant when natural-resource intensive manufacturing sectors are excluded. The importance of using flexible functional forms is emphasized.