UK productivity has slumped in the recession. But it is worth remembering it was very good up until then. Table 5 in Timmer et al is very useful (Marcel P. Timmer & Robert Inklaar & Mary O'Mahony & Bart van Ark, 2011. "Productivity and Economic Growth in Europe: A Comparative Industry Perspective," International Productivity Monitor, Centre for the Study of Living Standards, vol. 21, pages 3-23, Spring). Remember that UK productivity grew a lot after Mrs Thatcher#s initial reforms. But this table is from 1995.
Thursday, 12 December 2013
Wednesday, 11 December 2013
Here’s a way of thinking about it.
First we work out the contribution of R&D to economic growth. Grilliches, (Griliches, Zvi, 1988. ">Productivity Puzzles and R&D: Another Nonexplanation” Journal of Economic Perspectives, American Economic Association, vol. 2(4), pages 9-21, Fall shows what to do. As he says
Write a growth accounting expression
Second, we apply some numbers. Suppose the returns to R&D, private and social, are 30%, an upper estimate. In the UK, spending on research councils is about £3.5bn and spending on HEFCE, which is university money related to research is £1.5bn. Total GDP is £1.56tn. Then r(R/Y)=0.3*(5bn/1.56tn)=0.001, which is the contribution of this public spend to growth. Multiplying that by GDP gives £1.56bn.
Suppose now that open access improves the ability of firms to get information from the R&D stock and so raises spillovers to public R&D. Suppose this raises the rate of return to 0.31. Then the extra GDP from open access is 0.01* £5bn = £50m. This looks like a lot. Is it worth it?
The 2008 RAE had 52,400 staff submitting to it. Suppose they submitted 4 articles each which is around 200,000 articles. Gold open access is currently costing around £2,000 per article, which is therefore £400m. Over 5 years, this is £80m per year. So it all hangs on whether Open Access boosts the rate of return to R&D, which it would have to do by more than 1percentage point in this case. Will it?
- Of the 30% return to R&D, Griliches suggests that spillovers are 20% (private returns are 10%). So a rise of 1pp in spillovers is a 5% rise in the spillovers rate of return. That seems like a very large number.
- b. Many argue that quite a lot of research is open access already in which case the cost might be lower, but the rise in the rate of return will be tiny.
- c. Total TFP growth in an economy is a Domar-weighted average of TFP growth in the sectors of the economy. Suppose that one of the sectors is public R&D and that its Domar weight is the share of public R&D in value added. So to get a rise in the growth contribution of 1 percentage point is the equivalent of a rise in researcher TFP of 1 percentage point. This seems like a very large increase just from Open Access (set against most estimates of total TFP growth which are around 1%pa, though of course researcher TFP growth might be higher).
Posted by Jonathan Haskel at 18:36