Lorenz K.F. Ekerdt and Kai-Jie Wu

The downward historical trend of research productivity has been used to suggest that there are severe permanent diminishing returns of knowledge production. We argue that a substantial portion of the trend is a transitory composition effect resulting from self-selection in researchers’ ability and the expansion of the researcher sector. We quantify said effect with a Roy model of researchers’ labor supply estimated using microdata on sectoral earnings distributions. Our results suggest that the average ability of researchers has fallen substantially. We then revisit the estimation of the knowledge production function and its resulting prediction on long-run economic growth. We find that separating transitory diminishing returns from permanent ones more than doubles the long-run growth rate of per capita income predicted by a broadclass of growth models.

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Paper argues that the productivity of researchers has fallen in large part because “the average ability of researchers has fallen substantially” due to dumber people selecting into research careers.