Quality ladders, growth, and R&D: an assessment from U.S. industry

Abstract

This paper present a version of recent Schumpeterian growth models. I present a different specification of preferences, by allowing goods within industries to be subtitutes, albeit imperfect ones. I show that assuming R&D spillovers, which allow easier R&D for less technologically advanced goods, leads to identical R&D intensities across goods within an industry. I also show that in the steady-state industries with greater shares in expenditure, greater ease of R&D and higher markups will experience higher real growth. I then present empirical evidence using Solow residuals from U.S. industry testing these relationships. I find the correlation between technology growth and markups to be weak. There is evidence of a positive impact of company-financed R&D on technology growth.