Intrinsic Business Cycles with Pro-Cyclical R&D
AbstractRecent empirical work finds that R&D expenditures are quite procyclical, even for firms that are not redit-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 knowledge intensively, (2) it is a long-term investment with uncertain applications and (3) it suffers from diminishing returns over time.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1102.
Length: 28 pages
Date of creation: Jan 2006
Date of revision:
Schumpeterian; R&D investment; endogenous cycles; endogenous growth;
Find related papers by JEL classification:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-14 (All new papers)
- NEP-INO-2007-01-14 (Innovation)
- NEP-MAC-2007-01-14 (Macroeconomics)
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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