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Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence

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  • Daniel J. Wilson

    (Federal Reserve Bank of San Francisco)

Abstract

his paper provides an exploratory analysis of whether data on the research and development (R&D) spending directed at particular technological/product fields can be used to measure industry-level capital-embodied technological change. Evidence from the patent literature suggests that the R&D directed at a product, as the main input into the "innovation" production function, is proportional to the value of the innovations in that product. I confirm this hypothesis by showing that the decline in the relative price of a good is positively correlated with the R&D directed at that product. The hypothesis implies that the technological change, or innovation, embodied in an industry's capital is proportional to the R&D that is done ("upstream") by the economy as a whole on each of the capital goods that a ("downstream") industry purchases. Using R&D data from the National Science Foundation, I construct measures of capital-embodied R&D. I find they have a strong effect on conventionally measured total-factor productivity growth, a phenomenon that seems to be due partly to the mismeasurement of quality change in the capital stock and partly to a positive correlation between embodied and disembodied technological change. Finally, I find the cross-industry variation in empirical estimates of embodied technological change accord with the cross-industry variation in embodied R&D

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  • Daniel J. Wilson, 2002. "Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 285-317, April.
  • Handle: RePEc:red:issued:v:5:y:2002:i:2:p:285-317
    DOI: 10.1006/redy.2002.0163
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    Cited by:

    1. Jason G. Cummins & Giovanni L. Violante, 2002. "Investment-Specific Technical Change in the US (1947-2000): Measurement and Macroeconomic Consequences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 243-284, April.
    2. Basmann, Robert L. & McAleer, Michael & Slottje, Daniel, 2007. "Patent activity and technical change," Journal of Econometrics, Elsevier, vol. 139(2), pages 355-375, August.
    3. Max Elger, 2007. "Endogenous Growth and Investment-Specific Innovations - Evidence and Predictions," 2007 Meeting Papers 897, Society for Economic Dynamics.
    4. Caselli, Francesco & Wilson, Daniel J., 2004. "Importing technology," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 1-32, January.
    5. Daniel Wilson, 2003. "Embodying Embodiment in a Structural, Macroeconomic Input-Output Model," Economic Systems Research, Taylor & Francis Journals, vol. 15(3), pages 371-398.
    6. L. Rachel Ngai & Roberto M. Samaniego, 2006. "An R&D-Based Model of Multi-Sector Growth," CEP Discussion Papers dp0762, Centre for Economic Performance, LSE.
    7. Wilson, Daniel J., 2009. "IT and Beyond: The Contribution of Heterogeneous Capital to Productivity," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 52-70.
    8. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2014. "Optimal Investment in Heterogeneous Capital and Technology Under Restricted Natural Resource," Journal of Optimization Theory and Applications, Springer, vol. 163(1), pages 310-331, October.
    9. Vicente German-Soto & Luis Gutiérrez Flores, 2015. "A Standardized Coefficients Model to Analyze the Regional Patents Activity: Evidence from the Mexican States," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(1), pages 72-89, March.
    10. Venturini, Francesco, 2012. "Looking into the black box of Schumpeterian growth theories: An empirical assessment of R&D races," European Economic Review, Elsevier, vol. 56(8), pages 1530-1545.
    11. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.
    12. Roberto M Samaniego, 2005. "Investment-Specific Technical Change and the Production of Ideas," Computing in Economics and Finance 2005 291, Society for Computational Economics.
    13. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2011. "Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies," Working Papers halshs-00632887, HAL.

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    More about this item

    Keywords

    research and development; equipment-embodied technological change.;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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