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Heterogeneous Firms, R&D Policies and the Long Shadow of Business Cycles

Author

Listed:
  • Cristiana Benedetti-Fasil

    (European Commission - JRC)

  • Giammario Impullitti

    (School of Economics, University of Nottingham)

  • Omar Licandro

    (School of Economics, University of Nottingham)

  • Petr Sedlacek

    (Department of Economics, Oxford University)

Abstract

Growth and business cycles have a long tradition of being studied separately. However, events such as the Great Recession raise concerns that severe downturns may have detrimental implications for growth. If so, what policies may help alleviate such long-lasting effects of large recessions? To study these questions, we develop a tractable general equilibrium model of endogenous growth featuring heterogeneous firms, financial constraints and a range of innovation policies. A preliminary analysis suggests that counter-cyclical tax credits may serve as a powerful automatic stabilizer alleviating the long-lasting negative effects of severe cyclical downturns.

Suggested Citation

  • Cristiana Benedetti-Fasil & Giammario Impullitti & Omar Licandro & Petr Sedlacek, 2021. "Heterogeneous Firms, R&D Policies and the Long Shadow of Business Cycles," JRC Working Papers on Territorial Modelling and Analysis 2021-04, Joint Research Centre.
    • Handle: RePEc:ipt:termod:202104
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm dynamics; innovation policy; endogenous growth; business cycles;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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