The consequences of public and private research and development

We investigated the relationship of research and development to higher productivity and industrial efficiency. After reviewing the economic literature and finding no conclusive evidence on this subject we then proceeded to test the hypothesis that R&D does in fact promote increases in productivity which may be expected to lead to higher earnings. We found that until 1963 output per manhour and R&D expenditures in manufacturing industries were significantly related. However, for the last quinquennium (1963–1968) no statistically significant relationship could be shown. The hypothesis that the lack of correlation in the last period was due to Federally financed projects was deemed incorrect. However, it is possible that the lack of correlation was due to a poor choice of projects by the private sector or to an increase in projects which were designed to raise profits by reducing tax liabilities or simply due to activities which emphasized product development rather than efficiency generating research.