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Are Ideas Really Getting Harder To Find? R&D Capital and the Idea Production Function

Author

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  • Jakub Growiec
  • Peter McAdam
  • Jakub Mućk

Abstract

We supplement the 'Idea Production Function' (IPF) with measures of R&D capital. We construct a time series of R&D capital stock in the US (1968-2019) based on cumulated R&D investment. We estimate the IPF with patent applications as R&D output, allowing for a flexible treatment of unit productivity of R&D capital and R&D labor. We find that the elasticity of substitution between R&D input factors is 0.7-0.8 and significantly below unity. This implies that R&D capital is an essential factor in producing ideas, complementary to R&D labor. We also identify a systematic positive trend in R&D labor productivity at about 1% per year on average and a cyclical trend in R&D capital productivity. Our results suggest that instead of 'ideas getting harder to find', there is an increasing scarcity of R&D capital needed to find them.

Suggested Citation

  • Jakub Growiec & Peter McAdam & Jakub Mućk, 2022. "Are Ideas Really Getting Harder To Find? R&D Capital and the Idea Production Function," KAE Working Papers 2022-071, Warsaw School of Economics, Collegium of Economic Analysis.
    • Handle: RePEc:sgh:kaewps:2022071
    DOI: 10.33119/kaewps2022071
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    File URL: https://hdl.handle.net/20.500.12182/1128
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    Keywords

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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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