IDEAS home Printed from https://ideas.repec.org/p/fip/fedpwp/103326.html

Quality Adjustment in Industry Deflators Strengthens Estimated Innovation–Productivity Relationships

Author

Listed:
  • Enghin Atalay
  • Ali Hortacsu
  • Nicole Kimmel
  • Chad Syverson

Abstract

How do investments in innovation translate into future productivity growth? Empirically answering this question is challenging. R&D spending is an observed input into the innovation process, but mapping it to productivity growth requires assumptions about the depreciation of R&D capital, gestation lags, and how well such expenditures capture true innovative effort (Hall, 2007). Patents, an alternative measure, capture successful innovations but vary widely in novelty (Kelly et al., 2021) and economic value (Kogan et al., 2017). Firms may forgo patenting to preserve secrecy, while others patent strategically to protect existing products even when their underlying innovations are marginal.

Suggested Citation

  • Enghin Atalay & Ali Hortacsu & Nicole Kimmel & Chad Syverson, 2026. "Quality Adjustment in Industry Deflators Strengthens Estimated Innovation–Productivity Relationships," Working Papers 26-22, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:103326
    DOI: 10.21799/frbp.wp.2026.22
    as

    Download full text from publisher

    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2026/wp26-22.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.21799/frbp.wp.2026.22?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marco Errico & Danial Lashkari, 2025. "Aggregation and the Estimation of Quality Change: Application to U.S. Import Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 140(4), pages 3283-3335.
    2. Nathan Goldschlag & Travis J. Lybbert & Nikolas J. Zolas, 2020. "Tracking the technological composition of industries with algorithmic patent concordances," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 29(6), pages 582-602, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hötte, Kerstin, 2023. "Demand-pull, technology-push, and the direction of technological change," Research Policy, Elsevier, vol. 52(5).
    2. Mauro Caselli & Edwin Fourrier-Nicolai & Andrea Fracasso & Sergio Scicchitano, 2024. "Digital Technologies and Firms’ Employment and Training," CESifo Working Paper Series 11056, CESifo.
    3. Wu, Jianan & Guo, Cheng & Liu, Xiaojing & Dai, Jiapeng, 2025. "Policy-driven employment structure transformation: The role of innovation and education investment," International Review of Economics & Finance, Elsevier, vol. 98(C).
    4. Gong, Robin Kaiji & Li, Yao Amber & Manova, Kalina & Sun, Stephen Teng, 2025. "Tickets to the global market: First US patent award and Chinese firm exports," Journal of International Economics, Elsevier, vol. 157(C).
    5. Fernández-Villaverde, Jesús & Yu, Yang & Zanetti, Francesco, 2025. "Defensive Hiring and Creative Destruction," CEPR Discussion Papers 20041, Centre for Economic Policy Research.
    6. Ayerst, Stephen & Ibrahim, Faisal & MacKenzie, Gaelan & Rachapalli, Swapnika, 2023. "Trade and diffusion of embodied technology: an empirical analysis," Journal of Monetary Economics, Elsevier, vol. 137(C), pages 128-145.
    7. Yuwen Chen & Peihu Zhu & Weiwei Deng & Xiaoming Huang & Jian Ma & Jin Qin, 2026. "Enhancing patent recommendations for product innovation: integrating industry relevance and technology trends with multi-view learning," Scientometrics, Springer;Akadémiai Kiadó, vol. 131(3), pages 1801-1825, March.
    8. Enghin Atalay & Ali Hortaçsu & Nicole Kimmel & Chad Syverson, 2025. "Why Is Manufacturing Productivity Growth So Low?," NBER Working Papers 34264, National Bureau of Economic Research, Inc.
    9. Sung Jin Kang & Sun Lee & Seon Ju Lee, 2021. "Impacts of Environmental Agreements on Bilateral Trade of Climate Industry," Energies, MDPI, vol. 14(21), pages 1-17, November.
    10. Jos'e Alejandro Mendoza & Faustino Prieto & Jos'e Mar'ia Sarabia, 2021. "Inequality in the use frequency of patent technology codes," Papers 2111.11211, arXiv.org.
    11. Steijn, Mathieu P.A. & Koster, Hans R.A. & Van Oort, Frank G., 2022. "The dynamics of industry agglomeration: Evidence from 44 years of coagglomeration patterns," Journal of Urban Economics, Elsevier, vol. 130(C).
    12. Rahko, Jaana, 2025. "Vertical spillovers and the energy intensity of European industries," Energy Economics, Elsevier, vol. 141(C).

    More about this item

    Keywords

    ;
    ;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:103326. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Beth Paul (email available below). General contact details of provider: https://edirc.repec.org/data/frbphus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.