Animal Spirits and the Composition of Innovation in a Lab-Equipment R&D Model
AbstractWe revisit the issue of self-fulfilling “waves of enthusiasm” as stationary rational expectations equilibrium outcomes in endogenous-growth models that merge the quality-ladders with the expanding-variety mechanism. By considering a lab-equipment specification with vertical-innovation intertemporal spillovers but no intersectoral spillovers, we extend previous results of a negative impact of animal spirits on both horizontal aggregate R&D and number of firms to a framework where decreasing returns to horizontal entry are not a necessary condition. In contrast, our general-equilibrium setting allows us to predict an effect of animal spirits on R&D composition impacting neither on aggregate growth nor on aggregate vertical R&D, as reduced outlays in “mature” industries compensate for the increased R&D intensity in newly-born industries.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 336.
Length: 25 pages
Date of creation: Sep 2009
Date of revision:
endogenous growth; horizontal and vertical R&D; stationary sunspot equilibria;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-DGE-2009-10-10 (Dynamic General Equilibrium)
- NEP-ENT-2009-10-10 (Entrepreneurship)
- NEP-INO-2009-10-10 (Innovation)
- NEP-MIC-2009-10-10 (Microeconomics)
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