Research productivity is declining in advanced economies



A study by Nicholas Bloom et al. published last year in the American Economic Review had found that, in the US, research productivity (output) was declining sharply, even as research effort - money and number of researchers (input) were increasing. This was evidenced by data, specifically from the microchip industry, agricultural productivity, and medical innovations, but the researchers had also found a decline in research productivity for the US economy as a whole.


"We find that research productivity for the aggregate US economy has declined by a factor of 41 since the 1930s, an average decrease of more than 5 percent per year."
Bloom et al., 2020

A study by philiipp Boeing and Paul Hunermund replicated the study in two other advanced economies, using data from 64,902 R&D firms in Germany (1992-2017), and 3,947 R&D firms in China (2001-2019). Researchers used sales revenue, employment, revenue labor productivity and market capitalization as measures of output, and the effective number of researchers employed by firms to measure input.


The researchers found that although the effective number of researchers has grown steadily in Germany and rapidly in China, output has failed to grow proportionally in both countries. Researchers estimated the decline in research productivity to between 3.7% and 7.8% per year in Germany and between 15.4% and 29.3% in China.


The findings suggest that ideas are getting harder to find not just in the US, but advanced economies around the world. The researchers opined that, to solve the problem, countries need to rethink policies that curtail creative freedom and knowledge exchange. Read more about the study here.

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