Animal Spirits and the Composition of Innovation in a Lab-Equipment R&D Model with Transition
AbstractWe revisit the issue of self-fulfilling "waves of enthusiasm" as stationary rational expectations equilibria in tournament models of horizontal and vertical R&D. By considering a lab-equipment specification, the model predicts a positive effect of animal spirits on the balanced-growth-path (BGP) level of per-capita consumption without impacting on economic growth and on aggregate vertical R&D. However, transition is slower under "waves of enthusiasm", implying a longer period in which growth rates are higher than the BGP level. An economy that is subject to expectations shocks then converges at a time-varying speed. On average over time, transition is longer but less "painful" – i.e., with higher per-capita consumption levels – than otherwise.
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Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_040.
Length: 31 pages
Date of creation: Sep 2010
Date of revision:
animal spirits; endogenous growth; horizontal and vertical R&D; time-varying speed of transition;
Other versions of this item:
- Pedro Gil, 2013. "Animal spirits and the composition of innovation in a lab-equipment R&D model with transition," Journal of Economics, Springer, vol. 108(1), pages 1-33, January.
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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