## Did R&D Misallocation Contribute to Slower Growth?

_IMF Working Papers, September 12, 2025_

## Source details

**Canonical URL:** [Did R&D Misallocation Contribute to Slower Growth?](https://www.imf.org/en/publications/wp/issues/2025/09/12/did-r-d-misallocation-contribute-to-slower-growth-570339)

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## Bibliographic details
- Authors: Nils H. Lehr
- Published: September 12, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229025379.001

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### Summary
- The paper provides evidence that rising misallocation in the R&D sector contributed to the recent slowdown in U.S. productivity growth.
- Develops a growth accounting framework that allows for misallocation of R&D resources across firms, captured by wedges between their marginal cost and benefits of R&D.
- Shows that R&D wedges can be measured from R&D returns and documents large and persistent differences in R&D returns across US-listed firms.
- Combining data and model, estimates that frictions reduced productivity growth by 18% over 1975–2014 and that rising misallocation in the R&D sector accounts for 25% of the growth slowdown.

### Methodology
- Growth accounting framework incorporating firm-level R&D resource misallocation.
- Misallocation captured as wedges between firms’ marginal cost and marginal benefit of R&D.
- Measurement approach: infer R&D wedges from observed R&D returns across firms.
- Empirical focus on US-listed firms to document dispersion and persistence of R&D returns.

### Key findings and estimates
- Frictions reduced productivity growth by 18% over 1975–2014.
- Rising misallocation in the R&D sector accounts for 25% of the productivity growth slowdown.
- Large and persistent differences in R&D returns across US-listed firms are documented (no additional numeric dispersion metrics provided on the landing page).

### Subjects and keywords
- Subjects: Expenditure, Labor, Labor markets, Production, Productivity, Total factor productivity
- Keywords: growth accounting framework, growth slowdown, Labor markets, Productivity, productivity growth, R&D, R&D misallocation, R&D resource, R&D return dispersion, R&D wedge, Total factor productivity

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2025/09/12/did-r-d-misallocation-contribute-to-slower-growth-570339_