EconPapers    
Economics at your fingertips  
 

Too Much of a Good Thing? The Economics of Investment in R&D

Charles . Jones () and John C. Williams ()

Working Papers from Stanford University, Department of Economics

Abstract: February 26, 1996, Version 5.00

Empirical research in the micro productivity literature consistently supports the notion that there is too little R&D. However, the methodology of this literature, based on the neoclassical growth model, is challenged by new growth theory, which emphasizes a richer description of the relationship between R&D and productivity. In particular, it allows for incentives that lead to overinvestment in R&D. We incorporate several distortions to R&D into a general equilibrium growth model that provides a framework for the analytical and empirical analysis of the degree of over- or underinvestment in R&D. We derive the relationship between the social rate of return to R&D and the parameters estimated in the productivity literature. Surprisingly, our results indicate that estimates in the productivity literature represent lower bounds on the social rate of return to R&D and that the bias is limited to the overall growth rate of the economy. Additional supporting evidence for underinvestment is provided by the implied equilibrium R&D share from a calibrated version of the theoretical model.

References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www-econ.stanford.edu/faculty/workp/swp96005.ps (application/postscript)

Related works:
Journal Article: Too Much of a Good Thing? The Economics of Investment in R&D (2000) Downloads
Working Paper: Too Much of a Good Thing? The Economics of Investment in R&D (1999) Downloads
Working Paper: Too Much of a Good Thing? The Economics of Investment in R&D" (1999) Downloads
Working Paper: Too Much of a Good Thing? The Economics of Investment in R&D (1996)
Working Paper: Too much of a good thing? The economics of investment in R&D (1995)
Working Paper: Too Much of a Good Thing? The Economics of Investment in R&D
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wop:stanec:96005

Access Statistics for this paper

More papers in Working Papers from Stanford University, Department of Economics
Contact information at EDIRC.
Series data maintained by Thomas Krichel ().

 
Page updated 2014-10-12
Handle: RePEc:wop:stanec:96005