Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/189378 
Year of Publication: 
2006
Series/Report no.: 
Queen's Economics Department Working Paper No. 1102
Publisher: 
Queen's University, Department of Economics, Kingston (Ontario)
Abstract: 
Recent empirical work finds that R&D expenditures are quite procyclical, even for firms that are not redit-constrained during downturns. This has been taken as strong evidence against Schumpeterian-style theories of business cycles that emphasize the idea that downturns in production may be good times to allocate labor towards innovative activities. Here we argue that the procyclicality of R&D investment is, in fact, quite consistent with at least one of these theories. In our analysis, we emphasize three key features of R&D investment relative to other types of innovative activity: (1) it uses knowledge intensively, (2) it is a long-term investment with uncertain applications and (3) it suffers from diminishing returns over time.
Subjects: 
Schumpeterian
R&D investment
endogenous cycles
endogenous growth
JEL: 
E3
O3
O4
Document Type: 
Working Paper

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