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The Pro-cyclical R&D Puzzle: Technology Shocks and Pro-cyclical R&D Expenditure

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  • Taiji Harashima

    (University of Tsukuba & Cabinet Office of Japan)

Abstract

Empirically R&D expenditure moves pro-cyclically, but the pro- cyclicality is a puzzle from the Schumpeterian point of view. The paper examines the cyclical property of R&D expenditure in the context of endogenous growth, and concludes that (i) substitutability between investing in physical capital and investing in technology/knowledge is a key of the cyclical property of R&D, (ii) basically technology shocks accompany counter-cyclical R&D and demand shocks accompany pro-cyclical R&D, and (iii) the easiest way to solve the pro-cyclical R&D puzzle is to abandon the conjecture that business cycles are generated mainly by technology shocks.

Suggested Citation

  • Taiji Harashima, 2005. "The Pro-cyclical R&D Puzzle: Technology Shocks and Pro-cyclical R&D Expenditure," Macroeconomics 0507012, University Library of Munich, Germany, revised 12 Jul 2005.
    • Handle: RePEc:wpa:wuwpma:0507012
    Note: Type of Document - pdf; pages: 32
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    References listed on IDEAS

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    Cited by:

    1. Christian Rammer, 2011. "Auswirkungen der Wirtschaftskrise auf die Innovationstätigkeit der Unternehmen in Deutschland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 80(3), pages 13-34.
    2. Patrick Francois & Huw Lloyd-Ellis, 2009. "Schumpeterian Business Cycles with Pro-Cyclical R&D," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 567-591, October.

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    More about this item

    Keywords

    R&D; Technology shock; Business cycle; Schumpeterian; Endogenous growth;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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