Jeffrey I. Bernstein

Costs of Production, Intra- and Interindustry R&D Spillovers: Canadian Evidence

This paper presents estimates of the effects of intra- and interindustry R&D investment spillo vers on the costs and structure of production. The social rates of re turn to R&D investment and their deviation from the private rate are also estimated. Generally a firms own R&D capital is a substitute fo r R&D capital obtained freely via spillovers. However, for firms oper ating in industries with relatively larger R&D propensities, their ow n R&D capital and the intraindustry spillover are complementary. In a ll industries, the social rate of return greatly exceeds the private return and the contribution of the interindustry spillover to the soc ial return is virtually the same and small for all industries.

The Structure of Canadian Inter-industry R&D Spillovers, and the Rates of Return to R&D

This paper estimates the effects of interindustry R&D spillovers on the production cost of nine major Canadian industries. Production costs in all nine are affected by spillovers and six industries are influenced by at least two different source industries. Rates of return to R&D capital for each industry are also estimated. Private rates of return on R&D are at least two and a half times those on physical capital. Rates of return on R&D, inclusive of spillovers, are also computed: for industries that are major sources of spillover, the spillover-inclusive returns are at least twice the private returns. Copyright 1989 by Blackwell Publishing Ltd.

International R&D Spillovers between Canadian and Japanese Industries

This paper estimates the effects of intranational and international R&D spillovers on the cost and production structure for ten Canadian and Japanese manufacturing industries. Domestic spillovers generate greater effects on average variable cost and factor intensities compared to international spillovers between the two countries. Private and social rates of return to R&D are calculated for each industry in both countries. Social rates of return to R&D are one and one-half to twelve times the private returns. The Canadian social rates of return are generally two to three times higher than the Japanese rates.

Productivity in Manufacturing Industries, Canada, Japan and the United States, 1953-1986: Was the 'Productivity Slowdown' Reversed?

This paper analyzes total factor productivity growth and trends in relative efficiency levels in the national Two-Digit Manufacturing industries of Japan, Canada, and the United States during the last quarter-century. The well-known slowdown in productivity growth rates in the 1973-80 period was a common phenomenon across the three countries but was felt most strongly in Japan and least in Canada. While the 1980s saw a pick-up in productivity growth over the slowdown period, growth in productivity has not returned to the pre-1973 level. The productivity slowdown and any subsequent increase in productivity growth rates have been correlated across industries in the three countries to a very high degree.

International R&D Spillovers between Industries in Canada and the United States, Social Rates of Return and Productivity Growth

Investment in research and development (R&D) affects a countrys standard of living. Indeed, productivity growth depends on past as well as current R&D efforts (see Griliches 1988). A distinctive feature of R&D investment is that there are spillovers or externalities associated with this activity. A number of recent papers have shown the importance of domestic spillovers in generating productivity gains (see Nadiri 1993 for a survey). In a world with interrelated economies, a countrys stock of knowledge depends on its own R&D investment, as well as the R&D efforts of other countries. This paper presents estimates of the productivity gains and the social rates of return to R&D investment associated with international spillovers between Canadian and U.S. manufacturing industries.

Price margins and capital adjustment: Canadian mill products and pulp and paper industries

The purpose of this paper is to estimate a model incorporating noncompetitive behaviour in product and factor markets, In addition, capital accumulation is subject to adjustment costs so that firms are not constrained to be in long-run equilibrium. The model is applied to two major Canadian manufacturing industries: pulp and paper and mill products. The results show for both industries in each of the three product markets and the wood input market that there is competitive behaviour. In addition, the industries are not in long-run equilibrium as marginal adjustment costs cause marginal profit to exceed the rental rate on capital. With the industries exhibiting short-run competitive behaviour in product and factor markets, new estimates are derived for scale economies and rates of technological change. Unlike the results from other studies, both industries exhibit small scale economies and positive rates of technological change.

Irreversible Investment, Capital Costs and Productivity Growth: Implications for Telecommunications

This paper develops a model incorporating costly disinvestment and estimates the associated commitment premium required to invest in telecommunications. Results indicate that the irreversibility premium raises the opportunity cost of capital by 70 percent. This implies an average annual hurdle rate of return of 14 percent over the period 1986-2002. Irreversibility creates a distinction between observed and adjusted TFP growth. Observed growth, which omits the premium, annually averaged 2.8 percent from 1986 to 2002. This rate exceeded the (premium) adjusted TFP growth by 0.7 percentage points, therefore the average annual observed productivity growth overestimated the corrected rate by 33 percent.

Investment, Labour Skills, and Variable Factor Utilization in the Theory of the Firm

In this paper a model of investment is developed in which the capital utilization rate is a decision to be undertaken by the firm. The analysis is conducted within two contexts: first, when capital is the sole quasi-fixed factor, and the second, when we introduce skilled and unskilled labour. The distinguishing feature in the expanded model is that skilled labour represents an additional quasi-fixed factor. The firm determines the capital utilization rate by balancing the output gains against the higher wage bill, associated with the greater service flow per unit of the stock. We characterize the short-run equilibrium, the dynamic path, and the steady state. A number of results emerge concerning the relationships between the utilization rate, the capital intensity, the capital growth rate, and the skill composition of the labour force. Investissement, specialisation de la main-daeuvre et utilisation du facteur variable dans la theorie de la firme. Dans ce memoire, lauteur developpe un modele dinvestissement dans lequel le taux dutilisation du capital est une decision de la firme. Lanalyse est developpee dans deux contextes. Dans le premier cas, le capital est seul facteur quasi-fixe, alors que dans le second cas, lauteur introduit la main daeuvre specialisee et non-specialisee. La caracteristique distinctive du modele agrandi est que la main-dceuvre specialisee constitue un facteur quasi-fixe additionnel. La firme determine le taux dutilisation du capital en definissant une relation dequivalence entre 1accroissement de la production et les cotuts additionnels en salaires. Lauteur etablit lequilibre a court terme, le sentier dajustement dynamique, et la solution en regime permanent. De ces analyses, il ressort un certain nombre de relations entre le taux dutilisation du capital, le degre dintensite capitalistique, le taux de croissance du capital et le degre de specialisation de la main dceuvre.

Depreciation Estimation, R&D Capital Stock, and North American Manufacturing Productivity Growth

This paper estimates R&D depreciation rates for the U.S. and Canadian manufacturing sectors. We find that R&D capital depreciates at a rate of 25 percent in the U.S., and in Canada the rate is 24 percent. Thus R&D capital depreciates at virtually the same rate in both countries. We also estimate similar user costs of R&D capital. This result implies that the marginal returns to R&D are equal in the two countries. Based on the new measures of R&D capital, factor price elasticities are estimated. For U.S. manufacturing a 1 percent increase in the R&D user cost leads to a 0.80 percent reduction in the demand for R&D capital, while for Canada the own R&D elasticity is significantly more inelastic at 0.14 percent. R&D growth contributes to TFP growth. In the U.S., R&D accounts for about 10 percent of annual productivity, while in Canada the contribution is around 6 percent.

Taxes, incentives and production: The case of Turkey

Abstract This paper investigates the effectiveness of investment incentives and corporate income taxes in influencing production and investment decisions in the Turkish electrical machinery, non-electrical machinery and transportation equipment industries. Three tax instruments are considered; the corporate income tax (CIT), the investment tax allowance (ITA), and the capital cost allowance (CCA). The results show that since there are significant capital adjustment costs, it is important to distinguish between the short, intermediate, and long-run effects associated with the tax instruments. Production decisions are relatively more responsive to changes in the ITA rate compared to changes in either the CCA or CIT rates in each of the runs. However, the ITA and CCA rates are equally cost effective in stimulating investment and superior to the CIT. The CCA and ITA rates generate investment expenditures of 1.5 to 2.5 times the loss in government revenue. Thus targeted instruments outperform the general CIT instrument. In addition, although the incentive to invest is enhanced, there is little effect on output and employment. Therefore, these tax incentives essentially after production techniques.