American Economic Review Vol. 97 No. 2 2007
Uncertainty and the Dynamics of R&D
Abstract
Uncertainty varies strongly over time, rising by 50% to 100% in recessions and by up to 200% after major economic and political shocks. This paper shows that higher uncertainty reduces the responsiveness of R&D to changes in business conditions - a “caution-effect” - making it more persistent over time. Thus, uncertainty will play a critical role in shaping the dynamics of R&D through the business cycle, and its response to technology policy. I also show that if firms are increasing their level of R&D then the effect of uncertainty will be negative, while if firms are reducing R&D then the effect of uncertainty will be positive.
- DOI
- 10.1257/aer.97.2.250
- Volume
- 97
- Issue
- 2
- Pages
- 250-255
- Language
- en
- Sources
- openalex crossref