Spillovers from publicly financed R&D capital in high-tech industries

This paper employs a dynamic production model to examine the short-run effects of publicly financed R&D capital on the cost structure of six high-tech US manufacturing industries. The results show that, given an industry's output, publicly financed R&D capital reduces the variable production cost in all industries. In addition an increase in publicly financed R&D causes output to increase implying that producers as well consumers are better off, despite the presence of strong monopoly power in some industries. A low bound for the 'social' rate of return to publicly financed R&D is also calculated. (C) 1999 Elsevier Science B.V. All rights reserved.