Author Abstract
Investment in intangible capital—in particular, research and development—increased dramatically since the 1990s. However, output and measured productivity growth remains sluggish in recent years. One potential reason is that a significant share of the increase in intangible investment is geared toward consumer products such as pharmaceutical drugs that are not included in measured economic output. We document that a significant fraction of total R&D spending in the U.S. economy is done by pharmaceutical firms and is geared to developing drugs for the elderly. Increased life expectancy among the elderly increases welfare, but is not reflected in estimates of total factor productivity.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: January 2021
- HBS Working Paper Number: 21-083
- Faculty Unit(s): Entrepreneurial Management