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Ambiguity attitude, R&D investments and economic growth

  • Guido Cozzi
  • Paolo Giordani

    ()

The process aimed at discovering new ideas is an economic activity whose returns are intrinsically uncertain. In a standard neo-Schumpeterian growth framework we assume that, when deciding upon R&D efforts, economic agents hold ‘ambiguous beliefs’ about the exact probability of arrival of the next vertical innovations, and face ambiguity via the α-MEU decision rule (Ghirardato et al. (2004)). Along the steady-state equilibrium the higher the agents’ ambiguity aversion (α), the lower the R&D efforts and, coeteris paribus, the overall economic performance. Consistently with a cross-country empirical evidence, this causal mechanism suggests that, together with the profitability conditions of the economy, different ‘cultural’ attitudes towards ambiguity may contribute to explain the different R&D intensities observed across countries.

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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 21 (2011)
Issue (Month): 2 (May)
Pages: 303-319

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Handle: RePEc:spr:joevec:v:21:y:2011:i:2:p:303-319
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