Working Paper: NBER ID: w28355
Authors: Efraim Benmelech; Janice C. Eberly; Joshua L. Krieger; Dimitris Papanikolaou
Abstract: Investment in intangible capital—in particular, research and development—increased dramatically since the 1990s. However, productivity growth remains sluggish in recent years. One potential reason is that a significant share of the increase in intangible investment is geared toward consumer products such as pharmaceutical drugs with limited spillovers to productivity. We document that a significant share of R&D spending in the U.S. is done by pharmaceutical firms and is geared to developing drugs for the older patients. Increased life expectancy and quality of life among the elderly increases welfare but may not be reflected in estimates of total factor productivity.
Keywords: R&D; pharmaceuticals; demographics; intangible capital; productivity
JEL Codes: I10; I15; L65; O32; O34; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased R&D expenditure (O39) | Focus on elderly demographic (J14) |
| R&D spending (O32) | Development of drugs that improve health outcomes for older adults (I15) |
| R&D spending targeting older patients (O32) | Little effect on measured productivity and output growth (O49) |
| Demographic trends (J11) | Shift of R&D investment towards older patients (O32) |