The Return on Government R&D
We estimate the causal impact of publicly funded R&D on private-sector productivity growth.
Identification is based on a novel external instrument derived from a narrative classification of all significant postwar changes to federal R&D appropriations. Using long-horizon local projections and our narrative instrument, we find that higher government R&D spending predicts persistent increases in private-sector productivity growth along with other measures of innovation. We estimate that the production function elasticity of government R&D capital is 0.12, implying that the returns to nondefense government R&D averaged roughly 180-211% over 1947-2022. Our estimates suggest that public R&D and public infrastructure investment each accounted for roughly 20-25% of business-sector productivity growth since 1947.
Date: 6 June 2023, 13:15 (Tuesday, 7th week, Trinity 2023)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Room A or
Speaker: Karel Mertens (Federal Reserve Bank of Dallas)
Organising department: Department of Economics
Part of: Seminar in Macroeconomics
Booking required?: Not required
Audience: Members of the University only
Editor: Daria Ihnatenko