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R&D, innovation spillover and business cycles

Uluc Aysun () and Zeynep Yom ()

No 2019-04, Working Papers from University of Central Florida, Department of Economics

Abstract: This paper shows that technology shocks have the largest impact on economies when industries adopt innovations of other industries at a high rate, if costs of adopting new technologies and adjusting R&D expenditures are low, and if innovators face a high degree of competition. It is not the level but the spillover of innovations across industries that is the key determinant of these findings. Under the conditions mentioned above, R&D becomes less procyclical and smoother along the business cycle yet R&D driven innovations have a larger impact on output since these innovations spillover at a higher rate. These inferences are drawn from a dynamic stochastic general equilibrium framework describing a real economy with endogenous growth. The latter feature allows us to infer the welfare implications of R&D processes.

Keywords: Research and development; spillover effects; endgenous growth (search for similar items in EconPapers)
JEL-codes: E30 E32 O30 O33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ino, nep-mac, nep-sbm and nep-tid
Date: 2019-10
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