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R&D, Market Power and the Cyclicality of Employment

Uluc Aysun (), Melanie Guldi (), Adam Honig and Zeynep Yom ()
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Uluc Aysun: University of Central Florida, Orlando, FL
Melanie Guldi: University of Central Florida, Orlando, FL

No 2020-01, Working Papers from University of Central Florida, Department of Economics

Abstract: This paper provides a first look into the joint effects of research and development (R&D) and market power on the cyclicality of employment. It presents a theoretical model with R&D and monopolistically competitive firms which shows that firms smooth their R&D activities when they face large R&D adjustment costs. This smoothing behavior comes at the expense of higher labor volatility, and it is stronger for firms with high R&D intensity and low market power. Firm-level data support these predictions. Dynamic panel estimations reveal that employment at competitive firms engaging in a high level of R&D is more procyclical.

Keywords: R&D; employment volatility; firm-level data; COMPUSTAT (search for similar items in EconPapers)
JEL-codes: E30 E32 O30 O33 (search for similar items in EconPapers)
Pages: 45 Pages
Date: 2020-08
New Economics Papers: this item is included in nep-com, nep-mac and nep-tid
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