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Research and Development, Utilization and Labor Requirements: A Dynamic Analysis

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  • Jeffrey I. Bernstein
  • M. Ishaq Nadiri

Abstract

In this study we have developed a dynamic analysis of a firm under taking plant and equipment and research and development investment,along with labor requirement and P&E utilization decisions. It is shown that in the short run increases in R&D cause the utilization rate of plant and equipment to rise and to decrease demand for labor per unit of R&D. We distinguish between the effects of the stock of R&D and the investment flow. The short run effect of changes in the stock of R&Don labor demand are quite distinct from the behavior observed along the intertemporal path. Along the path increases in the R&D investment rate must be accompanied by an increase in the labor requirement per unitof R&D. Contrary to a view point held by many, the R&D investment flow does not displace labor. Finally, our model provides a framework to justify the empirically observed positive relationship between the utilization and the P&E investment rates.

Suggested Citation

  • Jeffrey I. Bernstein & M. Ishaq Nadiri, 1982. "Research and Development, Utilization and Labor Requirements: A Dynamic Analysis," NBER Working Papers 1016, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:1016
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