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R&D? A Small Contribution to Productivity Growth

  • Comin, D.

In this paper I calibrate the contribution of R&D investments to productivity growth. The basis for the analysis is the free entry condition. This 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 a¥ected by the size of the R&D externalities, the presence of scale effects or diminishing returns in R&D after controlling for the growth rate of output and the interest rate. The resulting contribution of R&D to productivity growth in the US is smaller than three to five tenths of one percentage point. Interestingly, 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 perepective, 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 C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 02-01.

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Length: 39 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:cvs:starer:02-01
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  1. John C. Williams & Charles I. Jones, 1995. "Too much of a good thing? The economics of investment in R&D," Finance and Economics Discussion Series 95-39, Board of Governors of the Federal Reserve System (U.S.).
  2. Norrbin, Stefan C, 1993. "The Relation between Price and Marginal Cost in U.S. Industry: A Contradiction," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1149-64, December.
  3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
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  6. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  7. Diego Comin, 2003. "R&D? A Small Contribution to Productivity Growth," Macroeconomics 0306007, EconWPA.
  8. Charles I. Jones & John C. Williams, . "Measuring the Social Return to R&D," Working Papers 97002, Stanford University, Department of Economics.
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  15. Charles I. Jones, . "Sources of U.S. Economic Growth in a World of Ideas," Working Papers 98009, Stanford University, Department of Economics.
  16. Susanto Basu, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 719-751.
  17. Nadiri, M.I., 1993. "Innovations and Technological Spillovers," Working Papers 93-31, C.V. Starr Center for Applied Economics, New York University.
  18. R. C. O. Matthews, 1964. ""The New View of Investment": Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 78(1), pages 164-172.
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  20. Kortum, Samuel, 1993. "Equilibrium R&D and the Patent-R&D Ratio: U.S. Evidence," American Economic Review, American Economic Association, vol. 83(2), pages 450-57, May.
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