Research and Development, Utilization and Labor Requirements: A Dynamic Analysis
NBER Working Paper No. 1016
In this study we have developed a dynamic analysis of a firm under taking plant and equipment and research and development investment,along with labor requirement and P&E utilization decisions. It is shown that in the short run increases in R&D cause the utilization rate of plant and equipment to rise and to decrease demand for labor per unit of R&D. We distinguish between the effects of the stock of R&D and the investment flow. The short run effect of changes in the stock of R&Don labor demand are quite distinct from the behavior observed along the intertemporal path. Along the path increases in the R&D investment rate must be accompanied by an increase in the labor requirement per unitof R&D. Contrary to a view point held by many, the R&D investment flow does not displace labor. Finally, our model provides a framework to justify the empirically observed positive relationship between the utilization and the P&E investment rates.
Published: Bernstein, J. I. and M. I. Nadiri. "Research And Development And Intra-Spillovers: An Empirical Application Of Dynamic Duality," Review of Economic Studies, 1989, v56(186), 249-268.