| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 5054713 | Economic Modelling | 2013 | 7 Pages |
The literature on endogenous growth cycles predicts the countercyclical allocation of resources to R&D. However, this prediction is not supported by empirical studies. This study considers the R&D-based growth model with endogenous fluctuations introducing population growth and a negative externality that affects the productivity of R&D. We show that this simple modification makes R&D investment procyclical along sustained business cycles using both an overlapping generation framework and an infinitely-lived agent framework.
⺠This study considers the R&D-based growth model with endogenous fluctuations. ⺠The literature on endogenous growth cycles predicts the countercyclical R&D investment. ⺠Many empirical studies have illustrated that procyclical R&D investment is valid. ⺠We provide the theoretical model that achieves procyclical R&D.
