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A Note on R&D and Price Elasticity of Demand

Author

Listed:
  • Lücke Dorothea

    (DIW Berlin, Germany)

  • Schröder Philipp J.Η.

    (Aarhus School of Business, Denmark and DIW Berlin, Germany)

  • Schumacher Dieter

    (Europe University Viadrina in Frankfurt (Oder), Germany)

Abstract

This note explores the relationship between the price elasticity of demand and the R&D intensity of the product. We introduce the concept of R&D intensity into a standard Dixit- Stiglitz/Krugman-type setting. R&D activity is treated as a fixed cost of production. Within this framework, sectors with a higher R&D intensity show a lower price elasticity of demand. This proposition is confirmed by an empirical investigation of export demand for manufactured goods from major industrialised countries. Consequently, real exchange rate changes have an impact on the commodity structure of exports.

Suggested Citation

  • Lücke Dorothea & Schröder Philipp J.Η. & Schumacher Dieter, 2005. "A Note on R&D and Price Elasticity of Demand," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(6), pages 688-698, December.
    • Handle: RePEc:jns:jbstat:v:225:y:2005:i:6:p:688-698
    DOI: 10.1515/jbnst-2005-0608
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    References listed on IDEAS

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    2. Mardones, Cristian & Velásquez, Andrés, 2021. "Macroeconomic, intersectoral, and environmental effects of R&D subsidies in Chile: An input-output approach," Technological Forecasting and Social Change, Elsevier, vol. 173(C).

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