Cyclicality in Green Technological Innovation: The Role of Simultaneous R&D in a Green Economy

Manzoor Ahmad ()
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Manzoor Ahmad: University of Southampton Malaysia, TIFIES Research Group

Journal of Business Cycle Research, 2025, vol. 21, issue 1, No 4, 101 pages

Abstract: Abstract This paper examines the cyclical nature of green investment in research and development (R&D) within the context of the green economy, focusing on the simultaneous eco-innovation activities of multiple firms. A stochastic expanding-variety endogenous growth model is employed to explore the pro-cyclicality of green R&D, demonstrating how firms’ collective green innovation efforts during economic upswings lead to higher-quality, more impactful green technologies. These innovations, spurred by environmental incentives and market demands for sustainability, significantly expand the knowledge base, pushing the green economy forward. The simulations presented over varying periods—10, 20, 30, and 40 years—reveal the long-term effects of economic cycles on green technology levels, production output, and patent valuations, indicating a potential for sustained growth in green technologies and industries driven by ongoing innovation. By integrating green innovation into the economic model, this paper highlights the role of policy incentives and market demand in fostering sustainable technology development. It suggests that well-calibrated economic policies and incentives can significantly influence the trajectory of the green economy, especially when they enhance the attractiveness and yields of green investments.

Keywords: Green R&D; Simultaneous green innovation; Pro-cyclical; Aggregate fluctuations; Green R&D subsidies (search for similar items in EconPapers)
JEL-codes: E32 Q55 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s41549-025-00113-2

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