Schumpeterian Business Cycles with Pro-Cyclical R&D
AbstractRecent empirical work finds that R&D expenditures are quite procyclical, even for firms that are not credit-constrained during downturns. This has been taken as strong evidence against Schumpeterian-style theories of business cycles that emphasize the idea that downturns in production may be good times to allocate labor towards innovative activities. Here we argue that the procyclicality of R&D investment is, in fact, quite consistent with at least one of these theories. In our analysis, we emphasize three key features of R&D investment relative to other types of innovative activity: (1) it uses implemented knowledge intensively, (2) it is a long-term investment with uncertain applications and (3) it suffers from diminishing returns over time. (Copyright: Elsevier)
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Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 12 (2009)
Issue (Month): 4 (October)
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Postal: Review of Economic Dynamics Academic Press Editorial Office 525 "B" Street, Suite 1900 San Diego, CA 92101
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Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Ríos-Rull, José-Víctor & Santaeulàlia-Llopis, Raül, 2010. "Redistributive shocks and productivity shocks," Journal of Monetary Economics, Elsevier, Elsevier, vol. 57(8), pages 931-948, November.
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DIW Berlin, German Institute for Economic Research, vol. 80(3), pages 13-34.
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- Galo Nuño, 2011. "Optimal research and development and the cost of business cycles," Journal of Economic Growth, Springer, Springer, vol. 16(3), pages 257-283, September.
- Kadri Männasoo & Jaanika Meriküll, 2011. "How do demand fluctations and credit constraints affect R&D? Evidence from Central, Southern and Eastern Europe," Bank of Estonia Working Papers, Bank of Estonia wp2011-09, Bank of Estonia, revised 19 Jul 2011.
- Min Ouyang, 2010. "Cyclical Persistence and the Cyclicality of R&D," Working Papers, University of California-Irvine, Department of Economics 101104, University of California-Irvine, Department of Economics, revised Mar 2011.
- Elena Sochirca & Óscar Afonso & Pedro Mazeda Gil, 2011. "Directed technological change with costly investment and complementarities, and the skill premium," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 401, Universidade do Porto, Faculdade de Economia do Porto.
- Patrick Francois & Huw Lloyd-Ellis, 2006. "Growth, Cycles and Welfare: A Schumpeterian Perspective," Working Papers, Queen's University, Department of Economics 1090, Queen's University, Department of Economics.
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