Document Type
Working Paper
Publication Date
5-5-2025
Language
en-US
Abstract
R&D investment has grown robustly, yet aggregate productivity growth has stagnated. Is this because “ideas are getting harder to find”? This paper uses micro-data from the US Census Bureau to explore the relationship between R&D and productivity in the manufacturing sector from 1976 to 2018. We find that both the elasticity of output (TFP) with respect to R&D and the marginal returns to R&D have risen sharply. Exploring factors affecting returns, we conclude that R&D obsolescence rates must have risen. Using a novel estimation approach, we find consistent evidence of sharply rising technological rivalry. These findings suggest that R&D has become more effective at finding productivity-enhancing ideas but these ideas may also render rivals’ technologies obsolete, making innovations more transient.
Recommended Citation
Yoshiki Ando, James Bessen & Xiupeng Wang,
The Rising Returns to R&D: Ideas Are not Getting Harder to Find
(2025).
Available at:
https://scholarship.law.bu.edu/faculty_scholarship/4055
Comments
Thanks to Holden Diethorn for providing data on tax costs. This work was supported in part through a grant from the Alfred P. Sloan Foundation (Grant #2023-21111). Any views expressed are those of the authors and not those of the U.S. Census Bureau. The Census Bureau has reviewed this data product to ensure appropriate access, use, and disclosure avoidance protection of the confidential source data used to produce this product. This research was performed at a Federal Statistical Research Data Center under FSRDC Project Number 2735 (CBDRB-FY24-P2735-R11743, CBDRB-FY25-P2735-R12155, and CBDRB-FY25- P2735-R12336).