Measuring Knowledge Stocks: A Process of Creative Destruction.

This paper proposes a new method for constructing R&D capital stocks developed to avoid the common assumption of a constant rate of knowledge depreciation, which implies wear and tear of knowledge. The method models the development of R&D capital stocks as a process of creative destruction linking the depreciation of knowledge to the emergence of new knowledge. A first empirical assessment of the new method – measuring the influence of R&D capital stocks on production in the manufacturing sectors of 12 OECD countries – produces plausible and robust results. [ABSTRACT FROM AUTHOR]