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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 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 ...
Journal Article
GSE guarantees, financial stability, and home equity accumulation
Before 2008, the government?s ?implicit guarantee? of the securities issued by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac led to practices by these institutions that threatened financial stability. In 2008, the Federal Housing Finance Agency placed these GSEs into conservatorship. Conservatorship was intended to be temporary but has now reached its tenth year, and policymakers continue to weigh options for reform. In this article, the authors assess both implicit and explicit government guarantees for the GSEs. They argue that adopting a legislatively defined ...
Discussion Paper
How Have the Euro Area and U.S. Labor Market Recoveries Differed?
The initial phase of the pandemic saw the euro area and U.S unemployment rates behave quite differently, with the rate for the United States rising much more dramatically than the euro area rate. Two years on, the rates for both regions are back near pre-pandemic levels. A key difference, though, is that U.S. employment levels were down by 3.0 million jobs in 2021:Q4 relative to pre-pandemic levels, while the number of euro area jobs was up 600,000. A look at employment by industry shows that both regions had large shortfalls in the accommodation and food services industries, as expected. A ...
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 Paper
The Implications of a graying japan for government policy
Japan is in the midst of a demographic transition that is both rapid and large by international standards. As recently as 1990, Japan had the youngest population among the Group of 6 large, developed countries. However, the combined effects of aging of the baby boomer generation and low fertility rates have produced very rapid aging. Japan now finds itself with the oldest population among the Group of 6, and its population will continue to age at a rapid pace in future years. Aging is already placing a burden on government finances, and Japan's ability to confront the negative fiscal ...