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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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Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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  1. Charles I. Jones & John C. Williams, 1997. "Measuring the social return to R&D," Finance and Economics Discussion Series 1997-12, Board of Governors of the Federal Reserve System (U.S.).
  2. Susanto Basu, 1995. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," NBER Working Papers 5336, National Bureau of Economic Research, Inc.
  3. Ariel Pakes & Mark Schankerman, 1984. "The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Chapters, in: R&D, Patents, and Productivity, pages 73-88 National Bureau of Economic Research, Inc.
  4. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
  5. Diego Comin, 2003. "R&D? A Small Contribution to Productivity Growth," Macroeconomics 0306007, EconWPA.
  6. Campbell, John & Perron, Pierre, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," Scholarly Articles 3374863, Harvard University Department of Economics.
  7. Zvi Griliches, 1998. "The Search for R&D Spillovers," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 251-268 National Bureau of Economic Research, Inc.
  8. Charles I. Jones & John C. Williams, 1999. "Too Much of a Good Thing? The Economics of Investment in R&D"," Working Papers 99015, Stanford University, Department of Economics.
  9. Norrbin, S.C., 1993. "The Relation Between Price and Marginal Cost in U.S. Industry: A Contradiction," Working Papers 1993_05_04, Department of Economics, Florida State University.
  10. Stokey, Nancy L, 1995. "R&D and Economic Growth," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 469-89, July.
  11. Nadiri, M.I., 1993. "Innovations and Technological Spillovers," Working Papers 93-31, C.V. Starr Center for Applied Economics, New York University.
  12. Charles I. Jones, . "Sources of U.S. Economic Growth in a World of Ideas," Working Papers 98009, Stanford University, Department of Economics.
  13. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  14. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  15. 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.
  16. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March.
  17. Ariel Pakes & Mark Schankerman, 1979. "The Rate of Obsolescence Of Knowledge, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Working Papers 0346, National Bureau of Economic Research, Inc.
  18. Helios Herrera & Enrique Schroth, 2003. "Profitable Innovation Without Patent Protection: The Case of Derivatives," FAME Research Paper Series rp76, International Center for Financial Asset Management and Engineering.
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