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Uncertainty and the dynamics of R&D

Bloom, Nick (2007) Uncertainty and the dynamics of R&D. CEPDP, 792. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 9780853281689

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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.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2007 Nick Bloom
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development
D - Microeconomics > D9 - Intertemporal Choice and Growth > D92 - Intertemporal Firm Choice and Growth, Investment, or Financing
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 792
Date Deposited: 21 Jul 2008 10:47
URL: http://eprints.lse.ac.uk/19724/

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