Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316867 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11753
Publisher: 
CESifo GmbH, Munich
Abstract: 
Defensive hiring of researchers by incumbent firms with monopsony power reduces creative destruction. This mechanism helps explain the simultaneous rise in R&D spending and decline in TFP growth in the US economy over recent decades. We develop a simple model highlighting the critical role of the inelastic supply of research labor in enabling this effect. Empirical evidence confirms that the research labor supply in the US is indeed inelastic and supports other model predictions: incumbent R&D spending is negatively correlated with creative destruction and sectoral TFP growth while extending incumbents' lifespan. All these effects are amplified when ideas are harder to find. An extended version of the model quantifies these mechanisms' implications for productivity, innovation, and policy.
Subjects: 
productivity growth
innovation
R&D
patents
creative destruction
JEL: 
E22
L11
O31
O33
Document Type: 
Working Paper
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