Measuring the Social Return to R&D

20 Pages Posted: 12 May 1997

See all articles by Charles I. Jones

Charles I. Jones

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

John C. Williams

Federal Reserve Bank of New York

Date Written: February 1997

Abstract

A large empirical literature reports estimates of the rate of return to R&D ranging from 30% to over 100%, supporting the notion that there is too little private investment in research. This conclusion is challenged by the new growth theory. We derive analytically the relationship between the social rate of return to R&D and the coefficient estimates of the empirical literature. We show that these estimates represent a lower bound on the true social rate of return. Using a conservative estimate of the rate of return to R&D of about 30%, optimal R&D investment is at least four times larger than actual investment.

JEL Classification: O32, O41

Suggested Citation

Jones, Charles I. and Williams, John C., Measuring the Social Return to R&D (February 1997). Available at SSRN: https://ssrn.com/abstract=2155 or http://dx.doi.org/10.2139/ssrn.2155

Charles I. Jones (Contact Author)

Stanford Graduate School of Business ( email )

Stanford GSB
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Stanford, CA 94305-4800
United States
650-725-9265 (Phone)

HOME PAGE: http://www.stanford.edu/~chadj

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John C. Williams

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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