Heterogeneous Researchers in a Two-Sector Representative Consumer Economy

Orlando Gomes

Revista Brasileira de Economia - RBE, 2006, vol. 60, issue 2

Abstract: Research activities have uncertain outcomes. The question asked in this paper is whether or not this uncertainty can be a central piece on the explanation of long run consumption growth paths. More specifically, we inquire how the existence of different research projects, with different degrees of uncertainty, contributes to unpredictable consumption growth paths. The proposed scenario is a two-sector representative consumer model with researchers that invest in different innovation projects. There is heterogeneity in terms of risk associated to research programs (researchers invest in projects with the same expected outcome but different volatility). This difference in volatility, combined with an adaptive learning – bounded rationality rule, implies an aggregate index of technology and a consumption growth rate that do not present a predictable pattern over time.

Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:60:y:2006:i:2:a:916

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