R&D, innovation spillover and business cycles

Uluc Aysun and Zeynep Yom

No 43, Villanova School of Business Department of Economics and Statistics Working Paper Series from Villanova School of Business Department of Economics and Statistics

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; endogenous growth (search for similar items in EconPapers)
JEL-codes: E30 E32 O30 O33 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-dge, nep-ino, nep-knm, nep-mac, nep-sbm and nep-tid
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Working Paper: R&D, innovation spillover and business cycles (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:vil:papers:43

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