Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures
This paper finds that inventive activity, as measured by firm-financed R&D expenditures, is procyclical. In addition, the "lost" R&D during recessions is larger than the "extra" R&D during expansions so the overall effect of the business cycle is to reduce firm-financed R&D during the 1957 5o 1999 period. The results suggest that a business cycle activity might influence the long-run growth rate of an economy by reducing firm-financed R&D and productivity growth.
Volume (Year): 29 (2003)
Issue (Month): 4 (Fall)
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