The Substitutability of Capital, Labor, and R&D in U.S. Manufacturing
Bulletin of Economic Research, Vol. 42, No.3, pp. 211-227, 1990
Posted: 28 Sep 2014 Last revised: 5 Apr 2016
Date Written: 1990
This paper examines the relationship between inputs in industrial production. The inputs studied here are capital, labor, and research and development (R&D). Using translog technology, our cross-industry analysis of six industries reveals that capital and labor are complements in production while R&D and labor are substitutes. However, the relationship between capital and R&D is not so clear cut. It is also found that constant-returns-to-scale hold for only two of the six industries. A test of sensitivity to changes in the R&D depreciation rates suggests that some industries are sensitive to such changes.
Note: Copyright 1990 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research.
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