Research

The downward historical trend of research productivity has been used to suggest that there are severe permanent diminishing returns of knowledge production. We argue that a substantial portion of the declining research productivity is a transitory phenomenon caused by self-selection in researchers' ability and the expansion of the research sector. To quantify these transitory diminishing returns, we develop a model of self-selected researcher supply and estimate it using data on the labor force share and earnings distribution of researchers. Our results suggest that the average ability of researchers has fallen dramatically. We then use our findings to revisit the estimation of the knowledge production function and its resulting prediction on long-run economic growth. We find that switching from an accounting framework without considering self-selection to one with nearly doubles the long-run growth rate of per capita income predicted by semi-endogenous growth models.

This paper studies firm diversification over 6-digit NAICS industries in U.S. manufacturing. We find that firms specializing in fewer industries now account for a substantially greater share of production than 40 years ago. This reallocation is a key driver of rising industry concentration: specialized firms have displaced diversified firms among industry leaders---absent this reallocation concentration would have decreased. We then provide evidence that specialized firms produce higher-quality goods: specialized firms tend to charge higher unit prices and are more insulated against Chinese import competition. Based on our empirical findings, we propose a theory in which growth shifts demand toward specialized, high-quality firms. We conclude that one should expect rising specialization in a growing economy.

This paper studies factor usage in the R&D sector. I show that the usage of non-labor inputs in R&D is significant, and that their usage has grown much more rapidly than the R&D workforce. Using a standard growth decomposition applied to the aggregate idea production function, I estimate that at least 77% of idea growth since the early 1960s can be attributed to the growth of non-labor inputs in R&D. I demonstrate that a similar pattern would hold on the balanced growth path of a standard semi-endogenous growth model, and thus that the decomposition is not simply a by-product of rising research intensity. I then show that combining long-running differences in factor growth rates with non-unitary elasticities of substitution in idea production leads to a slowdown in idea growth whenever labor and capital are complementary. I conclude by estimating this elasticity of substitution and demonstrate that the results favor complimentarities.