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Animal spirits and the composition of innovation in a lab-equipment R&D model with transition

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  • Pedro Gil

Abstract

We study the effect of animal spirits on the composition of aggregate R&D, the consumption level and economic growth in a tournament model of horizontal and vertical R&D. By considering a full lab-equipment specification, the model predicts a positive effect of animal spirits on the balanced-growth-path (BGP) level of per-capita consumption without impacting on economic growth and on aggregate vertical R&D. However, transition is slower under “waves of enthusiasm”, implying a longer period in which growth rates are higher than the BGP level. An economy that is subject to expectations shocks then converges at a time-varying speed. On average over time, transition is longer but less “painful”—i.e., with higher per-capita consumption levels—than otherwise. Copyright Springer-Verlag 2013

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  • Pedro Gil, 2013. "Animal spirits and the composition of innovation in a lab-equipment R&D model with transition," Journal of Economics, Springer, vol. 108(1), pages 1-33, January.
    • Handle: RePEc:kap:jeczfn:v:108:y:2013:i:1:p:1-33
    DOI: 10.1007/s00712-012-0266-8
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    3. Sicheng He, 2021. "Growth, innovation, credit constraints, and stock price bubbles," Journal of Economics, Springer, vol. 133(3), pages 239-269, August.

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    More about this item

    Keywords

    Animal spirits; Endogenous growth; Horizontal and vertical R&D; Time-varying speed of transition; O41; E32; D43; L16;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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