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Measuring the returns of R&D--An empirical study of the German manufacturing sector over 45 years

  • Lang, Guenter

Motivated by recent statistics that show significant growth in labor productivity, this paper seeks to analyze the long-term 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% of the effects of R&D on the knowledge stock appear within 4 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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Article provided by Elsevier in its journal Research Policy.

Volume (Year): 38 (2009)
Issue (Month): 9 (November)
Pages: 1438-1445

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Handle: RePEc:eee:respol:v:38:y:2009:i:9:p:1438-1445
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