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Research and Development and Intraindustry Spillovers: An Empirical Application of Dynamic Duality

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  • Jeffrey I. Bernstein
  • M. Ishaq Nadiri

Abstract

In this paper we estimate a model of production and investment based on the theory of dynamic duality and are particularly Interested in the effects of R&D spillovers and in calculating the social and private rates of return. We identify and estimate three effects associated with the intraindustry R&D spillover. First, costs decline as knowledge expands for the externality-receiving firms. Second, production structures are affected, as factor demands change in response to the spillover. Third, the rates of capital accumulation are affected by the R&D spillover. These cost-reducing, factor-biasing and capital adjustment effects of the spillover are estimated for four industries. The existence of R&D spillovers implies that the social and private rates of return to R&D capital differ. We estimate that the social return exceeds the private return in each industry. However, there is significant variation across industries in the differential between the social and private rates of return.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2002.

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Date of creation: Aug 1986
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Publication status: published as Review of Economic Studies, Vol. 56, pp. 249-269, (April 1989).
Handle: RePEc:nbr:nberwo:2002

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  1. Evenson, Robert E & Kislev, Yoav, 1973. "Research and Productivity in Wheat and Maize," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1309-29, Nov.-Dec..
  2. Richard Levin & Peter C. Reiss, 1984. "Tests of a Schumpeterian Model of R&D and Market Structure," NBER Chapters, in: R & D, Patents, and Productivity, pages 175-208 National Bureau of Economic Research, Inc.
  3. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
  4. Mortensen, Dale T, 1973. "Generalized Costs of Adjustment and Dynamic Factor Demand Theory," Econometrica, Econometric Society, vol. 41(4), pages 657-65, July.
  5. Epstein, Larry G & Denny, Michael G S, 1983. "The Multivariate Flexible Accelerator Model: Its Empirical Restrictions and an Application to U.S. Manufacturing," Econometrica, Econometric Society, vol. 51(3), pages 647-74, May.
  6. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September.
  7. Morrison, C. J. & Berndt, E. R., 1981. "Short-run labor productivity in a dynamic model," Journal of Econometrics, Elsevier, vol. 16(3), pages 339-365, August.
  8. Treadway, Arthur B., 1974. "The globally optimal flexible accelerator," Journal of Economic Theory, Elsevier, vol. 7(1), pages 17-39, January.
  9. Epstein, Larry G. & Yatchew, Adonis J., 1985. "The empirical determination of technology and expectations : A simplified procedure," Journal of Econometrics, Elsevier, vol. 27(2), pages 235-258, February.
  10. Nelson, Richard R, 1982. "The Role of Knowledge in R&D Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 453-70, August.
  11. Epstein, Larry G, 1981. "Duality Theory and Functional Forms for Dynamic Factor Demands," Review of Economic Studies, Wiley Blackwell, vol. 48(1), pages 81-95, January.
  12. Adam B. Jaffe, 1984. "Market Demand, Technological Opportunity and Research Spillovers on R&D Intensity and Productivity Growth," NBER Working Papers 1432, National Bureau of Economic Research, Inc.
  13. McLaren, Keith R & Cooper, Russel J, 1980. "Intertemporal Duality: Application to the Theory of the Firm," Econometrica, Econometric Society, vol. 48(7), pages 1755-62, November.
  14. Bronwyn H. Hall & Clint Cumminq & Elizabeth S. Laderman & Joy Mundy, 1988. "The R&D Master File Documentation," NBER Technical Working Papers 0072, National Bureau of Economic Research, Inc.
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