Good Rents versus Bad Rents: R&D Misallocation and Growth

Philippe Aghion, Antonin Bergeaud, Timo Boppart, Peter J. Klenow and Huiyu Li

No 20654, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Firm price-cost markups may reflect (a) bigger step sizes from quality innovations that confer significant knowledge spillovers onto other firms, and/or (b) higher process efficiency than competing firms or other factors which bear no obvious knowledge externality. We write down an endogenous growth model with innovation step size and process efficiency as alternative sources of markup heterogeneity. Compared with the laissez-faire equilibrium, the social planner wants to reallocate research towards high step size firms but not high process efficiency firms. We then use price and productivity data across firms in French manufacturing to infer firm step sizes and process efficiency. We find that the planner could achieve faster growth by reallocating research toward high step size firms, and more so if high step size firms could freely license their innovations to high process efficiency firms.

Keywords: Innovations; Creative destruction (search for similar items in EconPapers)
JEL-codes: E23 O31 O40 (search for similar items in EconPapers)
Date: 2025-09
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20654 (application/pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20654

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20654

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().