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

Citation Type: Working Paper

Publication Year: 2022

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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.

Url: https://ssl-kolegia.sgh.waw.pl/pl/KAE/Documents/WorkingPapersKAE/WPKAE_2022_071.pdf

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Authors: Growiec, Jakub; McAdam, Peter; Mućk, Jakub

Series Title: SGH KAE Working Paper Series

Publication Number: 2022/071

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Pages: 1-51

Publisher Location: Warsaw

Data Collections: IPUMS USA, IPUMS CPS

Topics: Other

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