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The cyclicality of R&D investment revisited

Hans van Ophem, Noud Giersbergen (), Kees Jan van Garderen () and Maurice Bun ()
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Hans van Ophem: University of Amsterdam

No 17-01, UvA-Econometrics Working Papers from Universiteit van Amsterdam, Dept. of Econometrics

Abstract: In Fabrizio and Tsolmon (2014) and Barlevy (2007) it is concluded that R&D investments are procyclical. Fabrizio and Tsolmon (2014) utilize a model based on Barlevy (2007), but differs in some respects and allows for more heterogeneity. However, we doubt whether their implied trends are intended. Fabrizio and Tsolman also set missing values for R&D equal to zero leading to unrealistic jumps in investment and its first differences. We reconcile and replicate both the Fabrizio and Tsolmon and Barlevy papers by considering extensions that encompass both models. Furthermore, we treat missing values more appropriately to check robustness of the results. Procyclicality is confirmed, but we find much less heterogeneity than Fabrizio and Tsolmon (2014) do. In particular obsolescence and patent effectiveness are no longer important but external financing is.

New Economics Papers: this item is included in nep-cse, nep-ino and nep-tid
Date: 2017-12-21
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