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

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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)

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Taiji Harashima

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.

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Paper provided by EconWPA in its series Macroeconomics with number 0507012.

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Length: 32 pages
Date of creation: 12 Jul 2005
Date of revision: 12 Jul 2005
Handle: RePEc:wpa:wuwpma:0507012

Note: Type of Document - pdf; pages: 32
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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-07-18 (All new papers)
NEP-INO-2005-07-18 (Innovation)
NEP-MAC-2005-07-18 (Macroeconomics)

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