Abstract
This paper employs a dynamic production model to examine the short-run effects of publicly financed R&D capital on the cost structure of six high-tech US manufacturing industries. The results show that, given an industry's output, publicly financed R&D capital reduces the variable production cost in all industries. In addition an increase in publicly financed R&D causes output to increase implying that producers as well consumers are better off, despite the presence of strong monopoly power in some industries. A low bound for the `social' rate of return to publicly financed R&D is also calculated.
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