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Too much of a good thing: Endogenous business cycles generated by bounded technological progress

  • Gomes, Orlando

Following Jones and Williams [Jones, C.I., Williams, J., 2000. Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth vol. 5 (no. 1), 65-85], we assume that R&D is simultaneously subject to positive and to negative external effects (e.g., the non-rival nature of technology conflicts with congestion externalities). This observation allows to conceive an economy where two R&D sectors evolve without departing significantly from each other in terms of their productive results (society tends to penalize imbalances in technical progress, making negative external effects to appear associated to a sector when this outstands relatively to the other sector; the second sector, in turn, will be subject to positive externalities that reflect a catching up effect). The proposed framework, when associated to a growth setup, is able to replicate the existence of endogenous fluctuations and, therefore, it intends to be a contribution to the literature on endogenous business cycles.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 25 (2008)
Issue (Month): 5 (September)
Pages: 933-945

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Handle: RePEc:eee:ecmode:v:25:y:2008:i:5:p:933-945
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