Motivated by recent statistics that show significant growth in labor productivity, this paper seeks to analyze the relationship between domestic R&D, knowledge stock and productivity dynamics. Time series data of the German manufacturing industry is used to estimate a variable cost function with the stock of knowledge being dependent upon current and past R&D spending. The estimates indicate that 50 percent of the effects of R&D on the knowledge stock appear within four years. However, the rate of return on R&D are shown to be drastically declining; recent rates of return on R&D are estimated to have reached an all-time low spanning the last 45 years. Current yields of R&D are only one third compared to the sixties. In conclusion, though the productivity slowdown of the seventies seems to have been overcome, this is not attributed to R&D investments.
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Paper provided by The German University in Cairo, Faculty of Management Technology in its series Working Papers with number
10.
Find related papers by JEL classification: D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
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