Research and development and intra-industry spillovers: An empirical application of dynamic duality

Jeffrey I. Bernstein, M. Ishaq Nadiri

    Research output: Contribution to journalArticlepeer-review

    Abstract

    In this paper we estimate a model of production and investment based on the theory of dynamic duality. We are particularly interested in the effects of R&D spillovers and in calculating the social and private rates of return. There are three effects associated with the intra-industry R&D spillover. First, costs decline as knowledge expands for the externality-receiving firms. Second, production structures are affected, as factor demands change in response to the spillover. Third, the rates of capital accumulation are affected by the R&D spillover. These cost-reducing, factor-biasing and capital adjustment effects are estimated for four industries. The existence of R&D spillovers implies that the social and private rates of return to R&D capital differ. We estimate that the social return exceeds the private return in each industry. Moreover, there is significant variation across industries in the differential between the social and private rates of return.

    Original languageEnglish (US)
    Pages (from-to)249-269
    Number of pages21
    JournalReview of Economic Studies
    Volume56
    Issue number2
    DOIs
    StatePublished - Apr 1989

    ASJC Scopus subject areas

    • Economics and Econometrics

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