Resource misallocation in the presence of R&D spillovers

Li, Kun, Azacis, Helmuts ORCID: https://orcid.org/0000-0002-6061-2100 and Luintel, Kul ORCID: https://orcid.org/0000-0001-7430-3926 2023. Resource misallocation in the presence of R&D spillovers. [Working Paper]. Cardiff Economics, Cardiff: Cardiff Business School. Available at: http://carbsecon.com/wp/E2023_24.pdf

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Abstract

We study resource misallocation by explicitly modelling R&D input and knowledge spillovers. The effects of R&D and spillovers on firm-level productivity are extensively studied in applied work, but not in the context of resource misallocation. We establish that, in the presence of spillovers, efficient resource allocation requires that more productive firms face higher R&D input prices. Analysing UK firm-level data, we find that the output gains from correcting misallocation are greatly overestimated when spillovers are ignored. Output losses due to capital distortions dominate those from labour and R&D inputs. Adopting a wrong R&D policy could lead to significant output losses.

Item Type:	Monograph (Working Paper)
Date Type:	Submission
Status:	Submitted
Schools:	Business (Including Economics)
Publisher:	Cardiff Business School
Last Modified:	10 Feb 2024 02:30
URI:	https://orca.cardiff.ac.uk/id/eprint/162578

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