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Research bubbles

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  • Gersbach, Hans
  • Komarov, Evgenij

Abstract

We develop a model to rationalize and examine so-called “research bubbles”, i.e. research activities based on overoptimistic beliefs about the impact of this research on the economy. Research bubbles occur when researchers self-select into research activities and the government aggregates the assessment of active researchers on how advances in research may spur innovation and growth. In an overlapping generations framework, we study the occurrence of research bubbles and show that they tend to be welfare-improving. Particular forms can even implement the socially optimal solution. However, research bubbles can collapse, and we discuss institutional devices and the role of debt financing that can ensure the sustainability of such bubbles. Finally, we demonstrate that research bubbles emerge in various extensions of our baseline model.

Suggested Citation

  • Gersbach, Hans & Komarov, Evgenij, 2025. "Research bubbles," Economic Modelling, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:ecmode:v:143:y:2025:i:c:s0264999324002451
    DOI: 10.1016/j.econmod.2024.106888
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    Keywords

    Endogenous growth; Basic research and bubbles;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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