Uncertainty and the dynamics of R&D

Bloom, Nick (2007) Uncertainty and the dynamics of R&D. CEPDP (792). London School of Economics and Political Science. Centre for Economic Performance, 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
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HB Economic Theory
JEL classification:	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
Date Deposited:	21 Jul 2008 10:47
Last Modified:	15 Sep 2023 23:08
URI:	http://eprints.lse.ac.uk/id/eprint/19724

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