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  5. Self-Selection and the Diminishing Returns of Research

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Self-Selection and the Diminishing Returns of Research

  • Kai-Jie Wu
  • Lorenz K.F. Ekerdt
American Economic Review (Forthcoming)

Abstract

We argue that a substantial portion of the downward historical trend in U.S. research productivity is a composition effect resulting from self-selection in researcher ability and the dramatic expansion of the research sector. Estimating a Roy-like model of researcher supply using 1960- 2021 U.S. microdata, we find that this composition effect has lowered average researcher ability by between 37% and 53%, depending on specification. Adjusting for efficiency units attenuates the decline in researcher productivity by the same proportion, implying significant upward revisions in long-run growth predicted by a broad class of growth models.

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