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A Schumpeter-inspired approach to the construction of R&D capital stocks

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A new method for constructing R&D capital stocks is proposed and tested. Following Schumpeter, the development of R&D capital stocks is modelled as a process of creative destruction. Newly generated knowledge is assumed not only to add to the existing R&D capital stocks but also, by displacing old knowledge, to destroy part of that capital. This is in stark contrast to the perpetual inventory method, which postulates a constant rate of depreciation. We compare both methods by estimating the impact of R&D and spillovers on output of 9 industries in 12 OECD countries, and find that the new approach leads to more sensible and robust results.
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Document Type: Research Article

Affiliations: 1: Faculty of Economics and Management Studies, European University Viadrina, 15230 Frankfurt(Oder), Germany,Department of Economics and Institute for East European Studies, Free University Berlin, Germany 2: Faculty of Economics and Management Studies, European University Viadrina, 15230 Frankfurt(Oder), Germany,DIW Berlin, Germany

Publication date: 2007-02-01

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