Working Paper: NBER ID: w2570
Authors: Jeffrey I. Bernstein; M. Ishaq Nadiri
Abstract: R&D investment is an outcome of a corporate plan and is influenced by the exisintg technology, by prices, by product demand characteristics, and by the legacy of past capital stock decisions. In this paper we focus on the determinants and interaction of labor, physical capital and R&D. In particular, we investigate three major issues. The first relates to the nature of the factor substitution possibilities between the three inputs in response to changes in input pricees and estimate the own and cross once elasticities of the factors of production. The second problem pertains to the magnitude of which output expansion (or what may be considered the same thing, product demand growth) increases labor, physical, and R&D capital. Finally, we address the extent to which adjustment costs affect factor demands, and measure the magnitude of these costs for physical and R&D capital.
Keywords: R&D investment; productivity growth; factor substitution; adjustment costs
JEL Codes: O32; D24; L25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| R&D investment (O32) | productivity growth (O49) |
| R&D capital (O32) | labor demand (J23) |
| R&D capital (O32) | physical capital demand (E22) |
| increase in rental price of R&D capital (O39) | decrease in demand for R&D capital (O39) |
| wage rates (J31) | labor demand (J23) |
| R&D capital and physical capital (E22) | degree of complementarity (D10) |
| marginal value of R&D (O32) | marginal value of physical capital (E22) |
| marginal adjustment costs of R&D (O39) | net marginal value of R&D (O39) |