Productivity Growth, Environmental Regulations and the Composition of R&D

Albert Link

Bell Journal of Economics, 1982, vol. 13, issue 2, 548-554

Abstract: The average annual rate of productivity growth in the United States has fallen since the mid-1960s. One factor often cited for this trend is the slowdown in the level of R&D spending. In considering this factor, many researchers have examined the correlation between productivity growth and R&D spending and found that it was positive through the 1960s but near zero in the 1970s. This latter result has raised the question as to whether the productivity of R&D has collapsed. Evidence is presented in this article that the collapse of R&D in empirical productivity equations is conceptually misleading because a significant portion of R&D was directed in the 1970s toward compliance with environmental regulations. These expenditures appear to be negatively related to measured productivity growth.

Date: 1982
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