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Simultaneous Innovation and the Cyclicality of R&D

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  • Miroslav Gabrovski

    (University of Hawaii)

Abstract

There is ample evidence that R&D investment is mildly pro-cyclical. Whereas the existing literature can explain the positive correlation between investment in R&D and output, the moderate strength of the relationship remains under-explored. This paper develops a stochastic expanding-variety endogenous growth model that accounts for the observed mild pro-cyclicality of R&D. In the model, several firms may simultaneously make the same innovation. Innovations made by many firms simultaneously are of higher quality, on average, and contribute relatively more to the expansion of the knowledge stock in the economy. This delivers an endogenous mechanism that breaks the otherwise perfect correlation between R&D and output. A calibration of our model closely matches the cyclical properties of R&D. (Copyright: Elsevier)

Suggested Citation

  • Miroslav Gabrovski, 2020. "Simultaneous Innovation and the Cyclicality of R&D," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 122-133, April.
    • Handle: RePEc:red:issued:18-503
    DOI: 10.1016/j.red.2019.09.002
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    Cited by:

    1. Ahmad, Manzoor, 2021. "Non-linear dynamics of innovation activities over the business cycles: Empirical evidence from OECD economies," Technology in Society, Elsevier, vol. 67(C).
    2. Manzoor Ahmad & Jianghuai Zheng, 2023. "The Cyclical and Nonlinear Impact of R&D and Innovation Activities on Economic Growth in OECD Economies: a New Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 544-593, March.

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    More about this item

    Keywords

    Simultaneous innovation; Research and development; Medium-term cycles; Macroeconomic fluctuations; Endogenous cycles;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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