Economists have recently argued recessions play a useful role in fostering growth. Yet a major source of growth, R&D, is procyclical. This paper argues one reason for procyclical R&D is a dynamic externality inherent in R&D that makes entrepreneurs short-sighted and concentrate their innovation in booms, even when it is optimal to concentrate it in recessions. Additional forces may imply that procyclical R&D is desirable, but equilibrium R&D is likely to be too procyclical, and macroeconomic shocks are likely to have overly persistent effects on output and make growth more costly than in the absence of such shocks.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Other versions of this item:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)