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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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Related research

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. Francesco Caselli & Daniel Wilson, 2002. "Importing technology," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  2. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2011. "Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies," Working Papers halshs-00632887, HAL.
  3. L. Rachel Ngai & Roberto M. Samaniego, 2006. "An R&D-based model of multi-sector growth," LSE Research Online Documents on Economics 3527, London School of Economics and Political Science, LSE Library.
  4. Robert L. Basmann & Michael McAleer & Daniel Slottje, 2003. "Patent Activity and Technical Change," CIRJE F-Series CIRJE-F-217, CIRJE, Faculty of Economics, University of Tokyo.
  5. Daniel J. Wilson, 2001. "Embodying embodiment in a structural, macroeconomic input-output model," Working Paper Series 2001-18, Federal Reserve Bank of San Francisco.
  6. Daniel Wilson, 2004. "IT and beyond: the contribution of heterogeneous capital to productivity," Working Paper Series 2004-13, Federal Reserve Bank of San Francisco.
  7. 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 2002-10, Board of Governors of the Federal Reserve System (U.S.).
  8. Max Elger, 2007. "Endogenous Growth and Investment-Specific Innovations - Evidence and Predictions," 2007 Meeting Papers 897, Society for Economic Dynamics.
  9. Roberto M Samaniego, 2005. "Investment-Specific Technical Change and the Production of Ideas," Computing in Economics and Finance 2005 291, Society for Computational Economics.
  10. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
  11. Venturini, Francesco, 2012. "Looking into the black box of Schumpeterian growth theories: An empirical assessment of R&D races," European Economic Review, Elsevier, vol. 56(8), pages 1530-1545.
  12. Rachel L. Ngai, 2007. "An R&D-based Model of Multi-sector Growth," 2007 Meeting Papers 349, Society for Economic Dynamics.

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