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Keywords:R&D 

Working Paper
The Returns to Government R&D: Evidence from U.S. Appropriations Shocks

Based on a narrative classification of all significant postwar changes in R&D appropriations for five major federal agencies, we find that an increase in nondefense R&D appropriations leads to increases in various measures of innovative activity and higher business-sector productivity in the long run. We structurally estimate the production function elasticity of nondefense government R&D capital using the SP-IV methodology of Lewis and Mertens (2023) and obtain implied returns of 150 to 300 percent over the postwar period. The estimates indicate that government-funded R&D accounts for one ...
Working Papers , Paper 2305

Working Paper
The Returns to Government R&D: Evidence from U.S. Appropriations Shocks

We estimate the causal impact of government-funded R&D on business-sector productivity growth. Identification is based on a novel narrative classification of all significant postwar changes in appropriations for R&D funded by five major federal agencies. Using long-horizon local projections and the narrative measures, we find that an increase in appropriations for nondefense R&D leads to increases in various measures of innovative activity, and higher productivity in the long run. We structurally estimate the production function elasticity of nondefense government R&D capital using the SP-IV ...
Working Papers , Paper 2305

Working Paper
Knowledge Diffusion, Trade and Innovation across Countries and Sectors

We provide a unified framework for quantifying the cross country and cross-sector interactions among trade, innovation, and knowledge diffusion. We study the effect of trade liberalization in a multi-country, multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are determined by innovation and diffusion. A reduction in trade costs induces a re-allocation of comparative advantage in production and innovation across sectors, which translates into higher growth along the counterfactual balanced growth path (BGP). Heterogeneous knowledge diffusion across ...
Working Papers , Paper 2017-29

Working Paper
Localized Knowledge Spillovers: Evidence from the Agglomeration of American R&D Labs and Patent Data

Superceded by 16-25. This working paper supersedes WP 12-22, WP 11-42, and WP 10-33. We employ a unique data set to examine the spatial clustering of private R&D labs, and, using patent citations data, we provide evidence of localized knowledge spillovers within these clusters. Jaffe, Trajtenberg, and Henderson (1993, hereafter JTH) provide an aggregate measure of the importance of knowledge spillovers at either the state or metropolitan area level. However, much information is lost regarding differences in the localization of knowledge spillovers in specific geographic areas. In this ...
Working Papers , Paper 15-3

Report
Congestion in Onboarding Workers and Sticky R&D

R&D investment spending exhibits a delayed and hump-shaped response to shocks. We show in a simple partial equilibrium model that rapidly adjusting R&D investment is costly if the probability of converting new hires into productive R&D workers (“onboarding”) is decreasing in the number of new hires (“congestion”). Congestion thus causes R&D-producing firms to slowly hire new workers in response to good shocks and hoard workers in response to bad shocks, providing a microfoundation for convex adjustment costs in R&D investment. Using novel, high-frequency productivity data on ...
Staff Reports , Paper 1075

Working Paper
Equity Financing Risk

A risk factor linked to aggregate equity issuance conditions explains the empirical performance of investment factors based on the asset growth anomaly of Cooper, Gulen, and Schill (2008). This new risk factor, dubbed equity financing risk (EFR) factor, subsumes investment factors in leading linear factor models. Most importantly, when substituted for investment factors, the EFR factor improves the overall pricing performance of linear factor models, delivering a significant reduction in absolute pricing errors and their associated t-statistics for several anomalies, including the ones ...
Finance and Economics Discussion Series , Paper 2020-037

Working Paper
R&D Subsidy and Import Substitution: Growing in the Shadow of Protection

I study the effect of an innovation subsidy on the growth of firms in a developing country. Using administrative microdata for Brazil and difference-in-differences, I find that innovation subsidies drive firm growth by facilitating firm entry into high-tariff markets with domestically produced versions of foreign goods. After receiving an innovation subsidy, firms issue more patents, expand their workforce, and diversify their product line. However, these patents receive minimal citations, while also heavily citing foreign patents. Firms increase imports of foreign inputs and expand their ...
Working Paper Series , Paper WP 2023-37

Working Paper
A Narrative Analysis of Federal Appropriations for Research and Development

This paper provides a narrative analysis of postwar federal appropriations for the research and development (R&D) activities of the Department of Defense, Department of Energy, National Aeronautics and Space Administration, National Institutes of Health and National Science Foundation—five agencies that consistently account for the vast majority of federal outlays for all types of R&D. We build a novel dataset quantifying the enacted full-year appropriations for all budgetary accounts funding R&D activities at these five agencies over fiscal years 1947-2019. We use this dataset to isolate a ...
Working Papers , Paper 2316

Working Paper
Nothing is Certain Except Death and Taxes : The Lack of Policy Uncertainty from Expiring \"Temporary\" Taxes

What is the policy uncertainty surrounding expiring taxes? How uncertain are the approvals of routine extensions of temporary tax policies? To answer these questions, I use event studies to measure cumulative abnormal returns (CARs) for firms that claimed the U.S. research and development (R&D) tax credit from 1996-2015. In 1996, the U.S. R&D tax credit was statutorily temporary but was routinely extended ten times until 2015, when it was made permanent. I take the event dates as both when these ten extensions of the R&D tax credit were introduced into committee and when the extensions were ...
Finance and Economics Discussion Series , Paper 2018-041

Working Paper
Innovation, investor sentiment, and firm-level experimentation

Due to frictions like informational externalities, firms invest too little in learning the productivity of newly available technologies through small-scale experimentation. I study the effect of investor sentiment on the relation between technological innovation and future firm-level R&D expenses, which include the resources used for small-scale experimentation. I find that rapidly improving investor sentiment strengthens the effect of technological innovation on one-year-ahead R&D expenses, and that the effect is more pronounced for high-tech firms with tighter financing constraints. The ...
Finance and Economics Discussion Series , Paper 2015-67

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