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Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence

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  • Daniel J. Wilson

    (Federal Reserve Bank of San Francisco)

Abstract

his paper provides an exploratory analysis of whether data on the research and development (R&D) spending directed at particular technological/product fields can be used to measure industry-level capital-embodied technological change. Evidence from the patent literature suggests that the R&D directed at a product, as the main input into the "innovation" production function, is proportional to the value of the innovations in that product. I confirm this hypothesis by showing that the decline in the relative price of a good is positively correlated with the R&D directed at that product. The hypothesis implies that the technological change, or innovation, embodied in an industry's capital is proportional to the R&D that is done ("upstream") by the economy as a whole on each of the capital goods that a ("downstream") industry purchases. Using R&D data from the National Science Foundation, I construct measures of capital-embodied R&D. I find they have a strong effect on conventionally measured total-factor productivity growth, a phenomenon that seems to be due partly to the mismeasurement of quality change in the capital stock and partly to a positive correlation between embodied and disembodied technological change. Finally, I find the cross-industry variation in empirical estimates of embodied technological change accord with the cross-industry variation in embodied R&D

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File URL: http://dx.doi.org/10.1006/redy.2002.0163
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 5 (2002)
Issue (Month): 2 (April)
Pages: 285-317

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Handle: RePEc:red:issued:v:5:y:2002:i:2:p:285-317

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Keywords: research and development; equipment-embodied technological change.;

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References

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Citations

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Cited by:
  1. Robert L. Basmann & Michael McAleer & Daniel Slottje, 2007. "Patent Activity and Technical Change," DEA Working Papers, Universitat de les Illes Balears, Departament d'Economía Aplicada 27, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  2. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-specific technical change in the US (1947-2000): measurement and macroeconomics consequences," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2002-10, Board of Governors of the Federal Reserve System (U.S.).
  3. Francesco Venturini, 2011. "Looking into the black box of Schumpeterian Growth Theories: an empirical assessment of R&D races," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 94/2011, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  4. L. Rachel Ngai & Roberto M. Samaniego, 2006. "An R&D-based model of multi-sector growth," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3527, London School of Economics and Political Science, LSE Library.
  5. Daniel J. Wilson, 2001. "Embodying embodiment in a structural, macroeconomic input-output model," Working Paper Series, Federal Reserve Bank of San Francisco 2001-18, Federal Reserve Bank of San Francisco.
  6. Max Elger, 2007. "Endogenous Growth and Investment-Specific Innovations - Evidence and Predictions," 2007 Meeting Papers, Society for Economic Dynamics 897, Society for Economic Dynamics.
  7. Daniel Wilson, 2004. "IT and beyond: the contribution of heterogeneous capital to productivity," Working Paper Series, Federal Reserve Bank of San Francisco 2004-13, Federal Reserve Bank of San Francisco.
  8. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
  9. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2011. "Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies," Working Papers, HAL halshs-00632887, HAL.
  10. Francesco Caselli & Daniel Wilson, 2003. "Importing Technology," NBER Working Papers 9928, National Bureau of Economic Research, Inc.
  11. Roberto M Samaniego, 2005. "Investment-Specific Technical Change and the Production of Ideas," Computing in Economics and Finance 2005, Society for Computational Economics 291, Society for Computational Economics.
  12. Rachel L. Ngai, 2007. "An R&D-based Model of Multi-sector Growth," 2007 Meeting Papers, Society for Economic Dynamics 349, Society for Economic Dynamics.

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