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R&D? A Small Contribution to Productivity Growth

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Diego Comin (New York University)

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Abstract

In this paper I evaluate the contribution of R&D investments to productivity growth. The basis for the analysis are the free entry condition and the fact that most R&D innovations are embodied. Free entry yields a relationship between the resources devoted to R&D and the growth rate of technology. Since innovators are small, this relationship is not directly affected by the size of the R&D externalities, or the presence of aggregate diminishing returns in R&D after controlling for the growth rate of output and the interest rate. The embodiment of R&D- driven innovations bounds the size of the production externalities. The resulting contribution of R&D to productivity growth in the US is smaller than three to five tenths of one percentage point. This constitutes an upper bound for the case where innovators internalize the consequences of their R&D investments on the cost of conducting future innovations. From a normative perspective, this analysis implies that, if the innovation technology takes the form assumed in the literature, the actual US R&D intensity may be the socially optimal.

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Paper provided by EconWPA in its series Macroeconomics with number 0306007.

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Date of creation: 09 Jun 2003
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Handle: RePEc:wpa:wuwpma:0306007

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Keywords: Research and Development; productivity growth; total factor productivity;

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Find related papers by JEL classification:
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  13. Comin, D., 2002. "R&D? A Small Contribution to Productivity Growth," Working Papers 02-01, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maloney, William & Rodriguez-Clare, Andres, 2007. "Innovation shortfalls," Policy Research Working Paper Series 4283, The World Bank. [Downloadable!]
    Other versions:
  2. Diego Comin & Sunil Mulani, 2007. "A theory of growth and volatility at the aggregate and firm level," Proceedings, Federal Reserve Bank of San Francisco, issue Nov. [Downloadable!]
    Other versions:
  3. Comin, D. & Gertler, M., 2003. "Medium Term Business Cycles," Working Papers 03-05, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
    Other versions:
  4. Diego Comin, 2004. "R&D: A Small Contribution to Productivity Growth," NBER Working Papers 10625, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Yelena Kalyuzhnova & Michael Kaser, 2006. "Prudential Management of Hydrocarbon Revenues in Resource-rich Transition Economies," Post-Communist Economies, Taylor and Francis Journals, vol. 18(2), pages 167-187, June. [Downloadable!] (restricted)
  6. Patrick Francois & Huw Lloyd-Ellis, 2005. "Schumpeterian Restructuring," Working Papers 1039, Queen's University, Department of Economics. [Downloadable!]
  7. William Maloney & Andrés Rodríguez-Clare, 2005. "Insuficiencias de innovación," RES Working Papers 4430, Inter-American Development Bank, Research Department. [Downloadable!]
  8. Patrick Francois & Huw Lloyd- Ellis, 2005. "I - Q Cycles," Macroeconomics 0511023, EconWPA. [Downloadable!]
    Other versions:
    • Patrick Francois & Huw Lloyd-Ellis, 2005. "I - Q Cycles," Working Papers 1040, Queen's University, Department of Economics. [Downloadable!]
  9. Charles I. Jones, 2004. "Growth and Ideas," NBER Working Papers 10767, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Jones, Charles I., 2005. "Growth and Ideas," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 16, pages 1063-1111 Elsevier. [Downloadable!] (restricted)
  10. Chu, Angus C., 2007. "Economic Growth and Patent Policy: Quantifying the Effects of Patent Length on R&D and Consumption," MPRA Paper 5476, University Library of Munich, Germany. [Downloadable!]
  11. Julia Hall & Grant M Scobie, 2006. "The Role of R&D in Productivity Growth: The Case of Agriculture in New Zealand: 1927 to 2001," Treasury Working Paper Series 06/01, New Zealand Treasury. [Downloadable!]
  12. Chu, Angus C., 2008. "Effects of Blocking Patents on R&D: A Quantitative DGE Analysis," MPRA Paper 3910, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  13. Kander, Astrid & Ejermo, Olof, 2006. "The Swedish Paradox," CIRCLE Electronic Working Paper Series 2006-01, CIRCLE (Centre for Innovation, Research and Competence in the Learning Economy), Lund University. [Downloadable!]
  14. Patrick Francois & Huw Lloyd-Ellis, 2004. "Investment Cycles," Macroeconomics 0405005, EconWPA, revised 05 May 2004. [Downloadable!]
  15. Francois, P. & Lloyd-Ellis, H., 2003. "Co-movement, capital and contracts: 'normal' cycles through creative destruction," Discussion Paper 62, Tilburg University, Center for Economic Research. [Downloadable!]
  16. Attar, Mustafa A., 2008. "Science in the Third Dimension of R&D," MPRA Paper 9427, University Library of Munich, Germany. [Downloadable!]
  17. Holger Strulik, 2005. "Too Much of a Good Thing? The Quantitative Economics of R&D–driven Growth Revisited," Discussion Papers 05-26, University of Copenhagen. Department of Economics. [Downloadable!]
    Other versions:
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