Fact of the Week: Doubling the Number of Public Sector Researchers Can Increase Productivity Growth By Up to 21 Percent

Source: Dierk Herzer, “An empirical note on the long-run effects of public and private RD on TFP,” MPRA Paper No. 100757, May 29, 2020.

Commentary: In theory, R&D should increase productivity in the long run by creating innovations that better leverage human and physical capital. But academic research of R&D’s influence on productivity has produced mixed results. A new study has identified a possible explanation for these discrepancies, noting that common methods of accounting for inflation may not be accurate for R&D. To compensate for this, the study examines the number of researchers in the public and private sectors between 1981 and 2017 across 20 OECD countries, finding that a doubling of private researchers increases productivity growth by 4.3 to 7.2 percent, while doubling public researchers increases productivity growth by 6.1 to 20.6 percent.