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Innovative Slowdown, Productivity Reversal? - Estimating the Impact of R&D on Technological Change

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Abstract

Motivated by the recent reversal in labor productivity growth, this paper is analyzing the relationship between R&D expenditures and productivity. Time series data of the German manufacturing industry is used to estimate a variable cost function, with the stock of knowledge being modeled as a quasifix input. The estimates show that the extracted yield is non-constant over the observation period. Current rates of return on own R&D are found to be significantly lower than during the sixties, and no signs of a significant reversal are detected. The long-term elasticity of production costs with respect to R&D reduced from –0.04 to just -0.02, the elasticity of labor demand from –0.40 to -0.15. Since the growth rates of research expenditures were also declining, the contribution of R&D to productivity growth is currently stagnating at the lowest level since 1960.

Suggested Citation

  • Guenter Lang, 2002. "Innovative Slowdown, Productivity Reversal? - Estimating the Impact of R&D on Technological Change," Discussion Paper Series 218, Universitaet Augsburg, Institute for Economics.
  • Handle: RePEc:aug:augsbe:0218
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    References listed on IDEAS

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    1. Gebhardt Flaig & Horst Rottmann, 2001. "Input Demand and the Short- and Long-Run Employment Thresholds: An Empirical Analysis for the German Manufacturing Sector," German Economic Review, Verein für Socialpolitik, vol. 2(4), pages 367-384, November.
    2. Zvi Griliches, 1998. "Issues in Assessing the Contribution of Research and Development to Productivity Growth," NBER Chapters,in: R&D and Productivity: The Econometric Evidence, pages 17-45 National Bureau of Economic Research, Inc.
    3. Catherine J. Morrison, 1989. "Unraveling the Productivity Growth Slowdown in the U.S., Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markup," NBER Working Papers 2993, National Bureau of Economic Research, Inc.
    4. Dietmar Harhoff, 1998. "R&D and Productivity in German Manufacturing Firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 6(1), pages 29-50.
    5. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    6. William D. Nordhaus, 2002. "Productivity Growth and the New Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 211-265.
    7. Hall, Bronwyn H. & Mairesse, Jacques, 1995. "Exploring the relationship between R&D and productivity in French manufacturing firms," Journal of Econometrics, Elsevier, vol. 65(1), pages 263-293, January.
    8. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, April.
    9. Flaig, Gebhard & Steiner, Viktor, 1993. "Searching for the "Productivity Slowdown": Some Surprising Findings from West German Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 57-65, February.
    10. Popp, David C., 2001. "The effect of new technology on energy consumption," Resource and Energy Economics, Elsevier, vol. 23(3), pages 215-239, July.
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    Keywords

    technology; innovation; research and development; productivity;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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