Issues in assessing the contribution of research and development to productivity growth

The article outlines the production function approach to the estimation of the returns to R&D and then proceeds to discuss in turn two very difficult problems: the measurement of output in R&D intensive industries and the definition and measurement of the stock of R&D 'capital'. Multicollinearity and simultaneity are taken up in the next section and another section is devoted to estimation and inference problems arising more specifically in the R&D context. Several recent studies of returns to R&D are then surveyed, and the paper concludes with suggestions for ways of expanding the current data base in this field.