Ambiguity Attitude, R&D Investments and Economic Growth

Guido Cozzi () and Paolo E. Giordani

Working Papers from Department of Economics, University of Glasgow

Abstract: 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.

Keywords: Schumpeterian growth; ambiguity; cultural attitude towards Ambiguity; arrival rate of innovation; R&D investments. (search for similar items in EconPapers)
JEL-codes: O32 O41 D81 Z1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino and nep-upt
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