Are Ideas Really Getting Harder To Find? R&D Capital and the Idea Production Function

Jakub Growiec, Peter McAdam () and Jakub Mućk

No 2022-071, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: We supplement the 'Idea Production Function' (IPF) with measures of R&D capital. We construct a time series of R&D capital stock in the US (1968-2019) based on cumulated R&D investment. We estimate the IPF with patent applications as R&D output, allowing for a flexible treatment of unit productivity of R&D capital and R&D labor. We find that the elasticity of substitution between R&D input factors is 0.7-0.8 and significantly below unity. This implies that R&D capital is an essential factor in producing ideas, complementary to R&D labor. We also identify a systematic positive trend in R&D labor productivity at about 1% per year on average and a cyclical trend in R&D capital productivity. Our results suggest that instead of 'ideas getting harder to find', there is an increasing scarcity of R&D capital needed to find them.

Keywords: R&D; Long-Run Growth; Technical Change; Estimation; CES. (search for similar items in EconPapers)
JEL-codes: O30 O40 O47 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2022-02
New Economics Papers: this item is included in nep-eff, nep-gro, nep-ino, nep-ipr and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2022071

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