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Innovative Slowdown, Productivity Reversal? - Estimating the Impact of R&D on Technological Change

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Abstract

Motivated by the recent reversal in labor productivity growth, this paper is analyzing the relationship between R&D expenditures and productivity. Time series data of the German manufacturing industry is used to estimate a variable cost function, with the stock of knowledge being modeled as a quasifix input. The estimates show that the extracted yield is non-constant over the observation period. Current rates of return on own R&D are found to be significantly lower than during the sixties, and no signs of a significant reversal are detected. The long-term elasticity of production costs with respect to R&D reduced from –0.04 to just -0.02, the elasticity of labor demand from –0.40 to -0.15. Since the growth rates of research expenditures were also declining, the contribution of R&D to productivity growth is currently stagnating at the lowest level since 1960.

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Bibliographic Info

Paper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 218.

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Length: pages
Date of creation: Mar 2002
Date of revision:
Handle: RePEc:aug:augsbe:0218

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Keywords: technology; innovation; research and development; productivity;

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  1. Dietmar Harhoff, 1998. "R&D and Productivity in German Manufacturing Firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 6(1), pages 29-50.
  2. Gebhardt Flaig & Horst Rottmann, 2001. "Input Demand and the Short- and Long-Run Employment Thresholds: An Empirical Analysis for the German Manufacturing Sector," German Economic Review, Verein für Socialpolitik, vol. 2(4), pages 367-384, November.
  3. Flaig, Gebhard & Steiner, Viktor, 1993. "Searching for the \"productivity slowdown’: some surprising findings from West German manufacturing," Munich Reprints in Economics 20364, University of Munich, Department of Economics.
  4. Zvi Griliches, 1979. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 92-116, Spring.
  5. Catherine J. Morrison, 1989. "Unraveling the Productivity Growth Slowdown in the U.S., Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markup," NBER Working Papers 2993, National Bureau of Economic Research, Inc.
  6. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
  7. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
  8. William D. Nordhaus, 2001. "Productivity Growth and the New Economy," NBER Working Papers 8096, National Bureau of Economic Research, Inc.
  9. Popp, David C., 2001. "The effect of new technology on energy consumption," Resource and Energy Economics, Elsevier, vol. 23(3), pages 215-239, July.
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