International R&D Spillovers Between U.S. and Japanese R&D Intensive Sectors

A great deal of empirical evidence shows that a country's production structure and productivity growth depend on its own R&D capital formation. With the growing role of international trade, foreign investment and international knowledge diffusion, domestic production and productivity also depend on the R&D activities of other countries. The purpose of this paper is to empirically investigate the bilateral link between the U.S. and Japanese economies in terms of how R&D capital formation in one country affects the production structure, physical and R&D capital accumulation, and productivity growth in the other country. We find that production processes become less labor intensive as international R&D spillovers grow. In the short-run, R&D intensity is complementary to the international spillover. This relationship persists in the long-run for the U.S., but the Japanese decrease their own R&D intensity. U.S. R&D capital accounts for 60% of Japanese total factor productivity growth, while Japanese R&D capital contributes 20% to U.S. productivity gains. International spillovers cause social rates of return to be about four times the private returns.

Product Demand, Cost of Production, Spillovers, and the Social Rate of Return to R&D

The purpose of this paper is to develop and estimate a model of production with endogenous technological change. Technological change arises from R&D capital accumulation decisions. These decisions respond to market and government incentives and generate R&D capital spillovers. A spillover network of senders and receivers is estimated. The network shows that each receiving industry is affected by a distinct set of R&D sources and each sending industry affects a unique set of receivers. For the receivers, spillovers generally expand product markets, lower product prices, increase production costs and input demands. For the sources, significant R&D spillovers cause the social rates of return to R&D capital to be substantially above the private returns.

Financing and Investment in Plant and Equipment and Research and Development

In this stuy a dynamic model of firm behavior is developed which integrates real and financial decisions. The model combines the effects of capital structure and input adjustirent costs on the process of capital accumulation. The existence, uniqueness and stability conditions of the long-run eguilibrium and the dynamic properties of the factor demand are explored. The equations derived from the theoretical model are estimated using firm cross-section time series data. The results indicate that for both Plant and Equipment (P&E) and Research and Development (R&D),the debt-eguity ratio significantly affects the investment demands and the elasticities are highly inelastic. The effect is stronger for P&E than for R&D capital in the long run, while the effects on P&E and R&D investment are quite similar in the short run.

Does Knowledge Intensity Matter? A Dynamic Analysis of Research and Development, Capital Utilization and Labor Requirements

In this paper we have developed a dynamic analysis of a firm under-taking research and development (R&D) investment, physical capital accumulation and utilization, along with labor requirement decisions. Empirical work has found that there are significant costs to develop knowledge. Consequently, R&D capital is treated as a quasi-fixed factor, along with the traditional physical capital stock. A number of empirically relevant implications arise from the analysis. It is shown that along the dynamic path as the R&D intensity of physical capital increases, knowledge per worker rises and the utilization rate of physical capital decreases. We distinguish between the intertemporal movement of the firm,and the response to unanticipated changes in demand and cost conditions. An increase in product demand causes the firm to increase both the R&D growth rate and the labor intensity of R&D capital. Contrary to a viewpoint held by many,the R&D investment does not displace labor. Finally, our model provides a framework to justify the empirically observed direct relationship between the physical capital growth and utilization rates.

Research and Development, Utilization and Labor Requirements: A Dynamic Analysis

In this study we have developed a dynamic analysis of a firm under taking plant and equipment and research and development investment,along with labor requirement and P&E utilization decisions. It is shown that in the short run increases in R&D cause the utilization rate of plant and equipment to rise and to decrease demand for labor per unit of R&D. We distinguish between the effects of the stock of R&D and the investment flow. The short run effect of changes in the stock of R&Don labor demand are quite distinct from the behavior observed along the intertemporal path. Along the path increases in the R&D investment rate must be accompanied by an increase in the labor requirement per unitof R&D. Contrary to a view point held by many, the R&D investment flow does not displace labor. Finally, our model provides a framework to justify the empirically observed positive relationship between the utilization and the P&E investment rates.

Corporate Taxes and Incentives and the Structure of Production: A Selected Survey

In this paper we develop a general intertemporal model of production, emphasizing the role of present and expected future corporate income taxes, credits and allowances along with costly adjustment and variable utilization of the quasi-fixed factors. Three specific issues are considered: 1) the direct and indirect effects of taxes operating through factor prices on the long-run input substitution, thus altering the structure of the production process; 2) the effects of tax policy changes on the rate and direction of technological change; and 3) the effects of tax policy on the inter- temporal pattern of substitutions and complementarities among the inputs that arise due to presence of quasi-fixity of some inputs. The rates of utilization of the quasi-fixed factors are determined in the short-run in conjunction with the demands for the variable factors of production. Hence, utilization rates depend on product and factor prices and therefore on tax policy. We specialize the general model in order to highlight each of the three themes and their interaction with tax policy. We also discuss the various ways in which empirical implementation of the theoretical models and a brief summary of the empirical results in the literature is also provided. Lastly, we discuss some policy implications which emerge from the analysis and empirical results.

Production, Financial Structure and Productivity Growth in U.S. Manufacturing

The purpose of this paper is to estimate a model that incorporates the effects of financial decisions on production, profitability, and productivity growth. Asymmetric information generates agency costs of debt and signaling benefits of dividends which then influence production decisions. The model is applied to the U.S. manufacturing sector. Agency costs and signaling benefits are measured by their effects on profitability. A one percent increase in debt reduces variable profit by 0.04 percent, while a one percent increase in dividends raises variable profit by 0.12 percent. Agency costs also limit the adjustment of U.S. manufacturing to long-run equilibrium. On average, for $1.00 of funds raised through bond issues, debt adjustment cost is about$0.05. The dynamic efficiency of the manufacturing sector is affected by financial considerations. Signaling benefits contribute 4.2 percent to total factor productivity growth, while agency costs reduce efficiency by 3.3 percent. Thus the financial effects on dynamic efficiency approximately offset each other.

Public Infrastructure, Input Efficiency and Productivity Growth in the Canadian Food Processing Industry

Canadian food processing is an important manufacturing industry, accounting for 13 percent of shipments. By its nature food processing depends on infrastructure capital. Our objective is to estimate infrastructure’s effects on input requirements, cost and productivity. The increase in capital and decrease in materials were respectively 2.5 and 3 times greater than the -0.07 infrastructure elasticity of labor. Infrastructure investment was cost-reducing by inducing reductions in employment and intermediate inputs. A 1 percent increase caused cost to decline by 0.16 percent. Infrastructure capital was a major contributor to productivity, annually contributing 0.5 percentage points. This was nearly double TFP growth.Food Processing, Infrastructure Capital, Productivity Growth.

Investment, Depreciation, And Capital Utilization

The purpose of this paper is to analyze the determinants of capital durability and utilization and their interdependence with investment decisions. The approach is based on the view that the flow of undepreciated capital is an output to be used in future production. At each date capital and non-capital inputs are combined to produce current output and the capital inputs to be used for future production. Thus capital accumulation occurs in a joint product context as two kinds of output are produced, one type for current sale and one type for future production. Another issue investigated in this paper concerns the allocation of resources within a firm between installing and utilizing capital and labor training activities. Often this problem is ignored in the theory of investment, not only because depreciation is exogenous, but also due to the treatment of labor as a variable factor of production. However, it is well recognized that firms cannot costlessly adjust labor. Thus the second purpose of this paper is to analyze the intertemporal relationship between the durability of capital and the growth rate of labor.

International R&D Spillovers between Canadian and Japanese Industries

This paper estimates the effects of intranational and international R&D spillovers on the cost and production structure for ten Canadian and Japanese manufacturing industries. Domestic spillovers generate greater effects on average variable cost and factor intensities compared to international spillovers between the two countries. Private and social rates of return to R&D are calculated for each industry in both countries. Social rates of return to R&D are one and one-half to twelve times the private returns. The Canadian social rates of return are generally two to three times higher than the Japanese rates.