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A Schumpeter-inspired Approach to the Construction of R&D Capital Stocks

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Bitzer, Jürgen; Stephan, Andreas

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Abstract A new method for constructing R&D capital stocks is proposed and tested. Following Schumpeter, the development of R&D capital stocks is modelled as a process of creative destruction. Newly generated knowledge is assumed not only to add to the existing R&D capital stocks but also, by displacing old knowledge, to destroy part of that capital. This is in stark contrast to the perpetual inventory method, which postulates a constant rate of depreciation. We compare both methods by estimating the impact of R&D and spillovers on output of nine industries in twelve OECD countries, and find that the new approach leads to more sensible and robust results.
Keywords external effects; research and development; capital; knowledge transfer; Schumpeter, J.; OECD member country
Classification National Economy; Economic Statistics, Econometrics, Business Informatics
Method theory formation
Free Keywords R&D; capital stocks; knowledge spillovers; creative destruction; perpetual inventory method; PIM; Schumpeter-Inspired Method; SIM
Document language English
Publication Year 2006
Page/Pages p. 179-189
Journal Applied Economics, 39 (2006) 2
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)