The structure of firm R&D, the factor intensity of production, and skill bias

This paper explores the effect of research and development (R&D) and capita l on factor intensity and skill bias in a sample of manufacturing plants. F irm and industry R&D as well as plant level capital increase the factor int ensity of labor over materials. In contrast, skill bias originates in porti ons of capital and R&D. Equipment capital and firm R&D in the same product as a plant are consistently skill biased, while structures are biased again st skill. Furthermore, general firm and industry R&D increase investment in equipment but not structures. This shows that the skill bias of R&D occurs through two distinct channels. First, firm R&D specific to the product inc reases the relative demand for skilled labor directly and in the short run through the cost function. Second, general firm and industry R&D exert an a dditional skill bias by favoring equipment over structures in the long run, demonstrating the broader compass of the skill bias of R&D over time.