Endogenous Technological Change under Uncertainty

Paul de Hek ()

No 02-047/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: How does risk or uncertainty in the productivity of research affect the growth rate of the economy? To answer this question, a model of endogenous technological change is used where sustained growth stems from intentional investments in R&D from profit-maximizing firms. The uncertainty arises from the productivity of these investments in R&D. The main result of this analysis is that the relationship between long-run growth and uncertainty (on the productivity of knowledge creation) depends on two main factors - the returns to scale in knowledge creation (increasing or non-increasing) and the value of the elasticity of intertemporal substitution (higher or lower than some critical value).Based on empirical studies on the returns to scale in knowledge creation ("non-increasing") and the value of the elasticity of intertemporal substitution ("higher than the critical value"), we expect a negative relationship between long-run growth and uncertainty regarding the productivity of knowledge creation.

Keywords: Long-run growth; Technological change; Uncertainty. (search for similar items in EconPapers)
JEL-codes: O3 (search for similar items in EconPapers)
Date: 2002-05-28, Revised 2002-11-08
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Citations: View citations in EconPapers (1)

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Working Paper: Endogenous Technological Change under Uncertainty (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20020047

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