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The Structure Of Firm R&D, The Factor Intensity Of Production, And Skill Bias

  • James D. Adams

This paper explores the effect of research and development (R&D) and capital on factor intensity and skill bias in a sample of manufacturing plants. Firm and industry R&D as well as plant level capital increase the factor intensity of labor over materials. In contrast, skill bias originates in portions of capital and R&D. Equipment capital and firm R&D in the same product as a plant are consistently skill biased, while structures are biased against skill. Furthermore, general firm and industry R&D increase investment in equipment but not structures. This shows that the skill bias of R&D occurs through two distinct channels. First, firm R&D specific to the product increases the relative demand for skilled labor directly and in the short run through the cost function. Second, general firm and industry R&D exert an additional skill bias by favoring equipment over structures in the long run, demonstrating the broader compass of the skill bias of R&D over time. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 81 (1999)
Issue (Month): 3 (August)
Pages: 499-510

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Handle: RePEc:tpr:restat:v:81:y:1999:i:3:p:499-510
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