R&D: A Small Contribution to Productivity Growth

39 Pages Posted: 4 Aug 2004 Last revised: 15 Jul 2010

See all articles by Diego Comin

Diego Comin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: July 2004

Abstract

In this paper I evaluate the contribution of R&D investments to productivity growth. The basis for the analysis are the free entry condition and the fact that most R&D innovations are embodied. Free entry yields a relationship between the resources devoted to R&D and the growth rate of technology. Since innovators are small, this relationship is not directly affected by the size of R&D externalities, or the presence of aggregate diminishing returns in R&D after controlling for the growth rate of output and the interest rate. The embodiment of R&D-driven innovations bounds the size of the production externalities. The resulting contribution of R&D to productivity growth in the US is smaller than three to five tenths of one percentage point. This constitutes an upper bound for the case where innovators internalize the consequences of their R&D investments on the cost of conducting future innovations. From a normative perspective, this analysis implies that, if the innovation technology takes the form assumed in the literature, the actual US R&D intensity may be the socially optimal.

Suggested Citation

Comin, Diego, R&D: A Small Contribution to Productivity Growth (July 2004). NBER Working Paper No. w10625. Available at SSRN: https://ssrn.com/abstract=565824

Diego Comin (Contact Author)

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
51
Abstract Views
963
rank
379,790
PlumX Metrics