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

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Author Info

  • 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.

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File URL: http://128.118.178.162/eps/mac/papers/0507/0507012.pdf
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Bibliographic Info

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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Web page: http://128.118.178.162

Related research

Keywords: R&D; Technology shock; Business cycle; Schumpeterian; Endogenous growth;

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References

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  1. Diego Comin & Mark Gertler, 2003. "Medium Term Business Cycles," NBER Working Papers 10003, National Bureau of Economic Research, Inc.
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  9. Bronwyn H. Hall, 1992. "Investment and Research and Development at the Firm Level: Does the Source of Financing Matter?," NBER Working Papers 4096, National Bureau of Economic Research, Inc.
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  13. Gadi Barlevy, 2004. "On the timing of innovation in stochastic Schumpeterian growth models," Working Paper Series WP-04-11, Federal Reserve Bank of Chicago.
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  16. Walde, Klaus, 2002. "The economic determinants of technology shocks in a real business cycle model," Journal of Economic Dynamics and Control, Elsevier, vol. 27(1), pages 1-28, November.
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Citations

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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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