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

Matthew Rafferty

Eastern Economic Journal, 2003, vol. 29, issue 4, 607-618

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.

Keywords: Business Cycle; Cycle; Expansion; Growth; Procyclical; Productivity; R&D; Recession (search for similar items in EconPapers)
JEL-codes: E32 O32 O47 (search for similar items in EconPapers)
Date: 2003
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Eastern Economic Journal is currently edited by Cynthia A. Bansak, St. Lawrence University and Allan A. Zebedee, Clarkson University

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