R&D, production structure and rates of return in the U.S., Japanese and German manufacturing sectors

A non-separable dynamic factor demand model

Pierre A. Mohnen, M Nadiri, Ingmar R. Prucha

    Research output: Contribution to journalArticle

    Abstract

    The focus of this paper is an analysis of the production structure, the demand for factor inputs, and the rates of return in the manufacturing sector of three major industrialized countries, the United States, Japan and Germany. The analysis is based on a dynamic factor demand model with two variable inputs, labor and materials, and two quasi-fixed inputs, capital and R&D. Adjustment costs are explicitly specified. The demand equations are derived from an intertemporal cost-minimization problem formulated in discrete time. The adopted estimation methodology allows for non-separability in the quasi-fixed factors. The model is estimated using data from 1965-1966 to 1977-1978. Particular attention is given to the role of R&D. For all countries the rate of return on R&D is found to be higher than that of capital. Their respective magnitudes are similar across countries. Considerable differences in the input demand elasticities with respect to output and prices are observed; also, for all countries the speed of adjustment for capital is found to be higher than that for R&D.

    Original languageEnglish (US)
    Pages (from-to)749-771
    Number of pages23
    JournalEuropean Economic Review
    Volume30
    Issue number4
    DOIs
    StatePublished - 1986

    Fingerprint

    Manufacturing sector
    Demand model
    Dynamic factor demand
    Rate of return
    Factors
    Germany
    Capital input
    Developed countries
    Discrete-time
    Adjustment costs
    Input demand
    Demand elasticity
    Speed of adjustment
    Nonseparability
    Methodology
    Japan
    Labor
    Cost minimization

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance

    Cite this

    R&D, production structure and rates of return in the U.S., Japanese and German manufacturing sectors : A non-separable dynamic factor demand model. / Mohnen, Pierre A.; Nadiri, M; Prucha, Ingmar R.

    In: European Economic Review, Vol. 30, No. 4, 1986, p. 749-771.

    Research output: Contribution to journalArticle

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