R&D Capital and the Idea Production Function

Jakub Growiec, Peter McAdam () and Jakub Mućk

No RWP 23-05, Research Working Paper from Federal Reserve Bank of Kansas City

Abstract: We supplement the “Idea Production Function” (IPF), whereby research and development (R&D) activity leads to growth, with measures of R&D capital. We construct the R&D capital stock in the United States and estimate the IPF with patent applications as R&D output, allowing for a flexible treatment of R&D productivity (over 1968–2019). The estimated substitution elasticity between R&D inputs is 0.7−0.8, which suggests that R&D capital is an essential factor in producing ideas and complementary to R&D labor. We identify a positive trend in R&D labor productivity (roughly 1 percent) and a cyclical variation of R&D capital productivity. Rather than “ideas getting harder to find,” the R&D capital needed to find them has become scarce.

Keywords: macroeconomics; Idea Production Function (IPF); R&D capital (search for similar items in EconPapers)
JEL-codes: O30 O40 O47 (search for similar items in EconPapers)
Pages: 62
Date: 2023-05-11
New Economics Papers: this item is included in nep-eff, nep-gro and nep-ino
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DOI: 10.18651/RWP2023-05

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