CFCM Seminar: Antonin Bergeaud (Banque de France)

This is an in-person seminar

Title:  Good rents versus bad rents: R&D misallocation and growth

Abstract:  Firm price-cost markups may reflect (a) higher step sizes from quality innovations that confer significant knowledge spillovers onto other firms, and/or (b) higher process efficiency than competing firms. We write down an endogenous growth model in which, compared with the laissez-faire equilibrium, the social planner would generally like to reallocate research resources towards high markup firms in case (a) so as to enhance knowledge spillovers but not in case (b). We then exploit unit price variation across high versus low markup firms in French manufacturing to assess the relative strength of these two forces. Viewed through the lens of our model, the French data imply that large firms typically display high process efficiency and low step size. The policy implication is that, to reach the social optimum, French research subsidies should favor only those high markup firms with “good” rents.