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Ambiguity Attitude, R&D Investments and Economic Growth

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  • Guido Cozzi
  • Paolo E. Giordani

Abstract

The process aimed at discovering new ideas is an economic activity whose returns are intrinsically uncertain. In a standard neo-Schumpeterian growth framework we assume that, when deciding upon R&D efforts, economic agents hold ‘ambiguous beliefs’ about the exact probability of arrival of the next vertical innovations, and face ambiguity via the α-MEU decision rule (Ghirardato et al. (2004)). Along the steady-state equilibrium the higher the agents’ ambiguity aversion (α), the lower the R&D efforts and, coeteris paribus, the overall economic performance. Consistently with a cross-country empirical evidence, this causal mechanism suggests that, together with the profitability conditions of the economy, different ‘cultural’ attitudes towards ambiguity may contribute to explain the different R&D intensities observed across countries.

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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2008_06.

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Handle: RePEc:gla:glaewp:2008_06

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Keywords: Schumpeterian growth; ambiguity; cultural attitude towards Ambiguity; arrival rate of innovation; R&D investments.;

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Cited by:
  1. Giordani, Paolo E. & Schlag, Karl H. & Zwart, Sanne, 2010. "Decision makers facing uncertainty: Theory versus evidence," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 659-675, August.
  2. Paolo E. Giordani & Luca Zamparelli, 2009. "On Robust Asymmetric Equilibria in Asymmetric R&D-Driven Growth Economies," Working Papers CELEG 0903, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  3. Christian Chiglino & Nicole Tabasso, 2014. "Risk Aversion in a Model of Endogenous Growth," School of Economics Discussion Papers 0314, School of Economics, University of Surrey.

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