TY - UNPB
T1 - R&D cyclicality and composition effects
T2 - a unifying approach
AU - Chernyshev, Nikolay
PY - 2017/9/27
Y1 - 2017/9/27
N2 - Existing empirical studies do not concur on whether R&D spending is procyclical or countercyclical: the former hypothesis is supported by studies of aggregate R&D spending, whereas the latter is vindicated by firm-level evidence. In this paper, we reconcile the two facts by advancing a general equilibrium framework, in which, while a single firm's R&D spending profile is countercyclical, aggregate R&D spending is procyclical owing to procyclical fluctuations in the number of R&D performers. Our findings suggest that economic crises might be beneficial for economic performance by fostering individual R&D effort. An advantage of our framework is that it brings together conflicting pieces of empirical evidence, while incorporating and building upon Schumpeter's hypothesis of countercyclical innovation.
AB - Existing empirical studies do not concur on whether R&D spending is procyclical or countercyclical: the former hypothesis is supported by studies of aggregate R&D spending, whereas the latter is vindicated by firm-level evidence. In this paper, we reconcile the two facts by advancing a general equilibrium framework, in which, while a single firm's R&D spending profile is countercyclical, aggregate R&D spending is procyclical owing to procyclical fluctuations in the number of R&D performers. Our findings suggest that economic crises might be beneficial for economic performance by fostering individual R&D effort. An advantage of our framework is that it brings together conflicting pieces of empirical evidence, while incorporating and building upon Schumpeter's hypothesis of countercyclical innovation.
KW - Economic cycles
KW - Opportunity cost hypothesis
KW - Procyclicality of R&D
KW - Countercyclicality of R&D
UR - https://ideas.repec.org/p/san/cdmawp/1705.html
M3 - Working paper
T3 - CDMA Working Paper
BT - R&D cyclicality and composition effects
ER -