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Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures

Author

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  • Matthew Rafferty

    (School of Business, Quinnipiac University)

Abstract

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.

Suggested Citation

  • Matthew Rafferty, 2003. "Do Business Cycles Influence Long-Run Growth? The Effect of Aggregate Demand on Firm-Financed R&D Expenditures," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 607-618, Fall.
    • Handle: RePEc:eej:eeconj:v:29:y:2003:i:4:p:607-618
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pellens, Maikel & Peters, Bettina & Hud, Martin & Rammer, Christian & Licht, Georg, 2024. "Public R&D investment in economic crises," Research Policy, Elsevier, vol. 53(10).
    2. repec:kap:iaecre:v:12:y:2006:i:2:p:277-286 is not listed on IDEAS
    3. Daniel Giedeman & Paul Isely & Gerald Simons, 2006. "Innovation and the Business Cycle: A Comparison of the U.S. Semiconductor and Automobile Industries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(2), pages 277-286, May.
    4. Paloma López-García & José Manuel Montero & Enrique Moral-Benito, 2012. "Business cycles and investment in intangibles: evidence from Spanish firms," Working Papers 1219, Banco de España.
    5. Masino, Serena, 2013. "Macro-Institutional Instability and the Incentive to Innovate," MPRA Paper 45178, University Library of Munich, Germany.
    6. Ahmad, Manzoor, 2021. "Non-linear dynamics of innovation activities over the business cycles: Empirical evidence from OECD economies," Technology in Society, Elsevier, vol. 67(C).
    7. Hud, Martin & Rammer, Christian, 2015. "Innovation budgeting over the business cycle and innovation performance," ZEW Discussion Papers 15-030, ZEW - Leibniz Centre for European Economic Research.
    8. repec:lic:licosd:23909 is not listed on IDEAS
    9. Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38766, University Library of Munich, Germany.
    10. Kadri M�nnasoo & Jaanika Merikull, 2011. "How do demand fluctations and credit constraints affect R&D? Evidence from Central, Southern and Eastern Europe," Bank of Estonia Working Papers wp2011-09, Bank of Estonia, revised 19 Jul 2011.
    11. Kadri Männasoo & Jaanika Meriküll, 2015. "The impact of firm financing constraints on R&D over the business cycle," Working Papers 348, Leibniz Institut für Ost- und Südosteuropaforschung (Leibniz Institute for East and Southeast European Studies).
    12. Bettina Becker, 2013. "The Determinants of R&D Investment: A Survey of the Empirical Research," Discussion Paper Series 2013_09, Department of Economics, Loughborough University, revised Sep 2013.
    13. Serena Masino, 2012. "Macroeconomic Instability and the Incentive to Innovate," Centre for Growth and Business Cycle Research Discussion Paper Series 167, Economics, The University of Manchester.
    14. Masino, Serena, 2012. "Macroeconomic instability and the incentive to innovate," MPRA Paper 38830, University Library of Munich, Germany.
    15. Nikolay Chernyshev, 2017. "R&D Cyclicality and Composition Effects: A Unifying Approach," CDMA Working Paper Series 201705, Centre for Dynamic Macroeconomic Analysis.
    16. Ozan Hatipoglu, 2012. "The relationship between inequality and innovative activity: a S chumpeterian theory and evidence from cross‐country data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(2), pages 224-248, May.

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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