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Did R&D Misallocation Contribute to Slower Growth?

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  • Nils H. Lehr

Abstract

This paper provides evidence that rising misallocation in the R&D sector contributed to the recent slowdown in U.S. productivity growth. I develop a growth accounting framework allowing for misallocation of R&D resources across firms captured by wedges between their marginal cost and benefits of R&D. I show that R&D wedges can be measured from R&D returns and document large and persistent differences in R&D returns across US-listed firms. Combining data and model, I estimate that frictions reduced productivity growth by 18% over 1975–2014 and that rising misallocation in the R&D sector accounts for 25% of the growth slowdown.

Suggested Citation

  • Nils H. Lehr, 2025. "Did R&D Misallocation Contribute to Slower Growth?," IMF Working Papers 2025/183, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/183
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