Intrinsic Business Cycles With Pro-cyclical R&d

Patrick Fracois and Huw Lloyd-Ellis
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Patrick Fracois: University of British Columbia
Authors registered in the RePEc Author Service: Patrick Francois ()

No 1102, Working Paper from Economics Department, Queen's University

Abstract: Recent empirical work finds that R&D expenditures are quite procyclical, even for firms that are not redit-constrained during downturns. This has been taken as strong evidence against Schumpeterian-style theories of business cycles that emphasize the idea that downturns in production may be good times to allocate labor towards innovative activities. Here we argue that the procyclicality of R&D investment is, in fact, quite consistent with at least one of these theories. In our analysis, we emphasize three key features of R&D investment relative to other types of innovative activity: (1) it uses knowledge intensively, (2) it is a long-term investment with uncertain applications and (3) it suffers from diminishing returns over time.

Keywords: Schumpeterian; R&D investment; endogenous cycles; endogenous growth (search for similar items in EconPapers)
JEL-codes: E3 O3 O4 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-01
New Economics Papers: this item is included in nep-ino and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1102

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