On the Timing of Innovation in Stochastic Schumpeterian Growth Models

Gadi Barlevy

No 10741, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent work has revived the Schumpeterian hypothesis that recessions facilitate innovation and growth. But a major source of productivity growth, research and development, is actually procyclical. This paper argues that while it is optimal to concentrate growth-enhancing activities in downturns, dynamic spillovers inherent to the R&D process lead private agents to concentrate too much of their R&D activity in booms, precisely when its social cost is highest. Thus, while previous literature has argued recessions promote growth and intertemporal substitution is a desirable consequence of fluctuations, in the case of R&D recessions discourage growth and intertemporal substitution proves to be a social liability.

JEL-codes: D62 E32 O3 (search for similar items in EconPapers)
Date: 2004-09
New Economics Papers: this item is included in nep-dev, nep-dge, nep-ent and nep-mic
Note: EFG PR
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Citations: View citations in EconPapers (32)

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Working Paper: On the timing of innovation in stochastic Schumpeterian growth models (2004)
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