TY  - JOUR
AU  - Bloom,Nicholas
TI  - Uncertainty and the Dynamics of R&D
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12841
PY  - 2007
Y2  - January 2007
UR  - http://www.nber.org/papers/w12841
L1  - http://www.nber.org/papers/w12841.pdf
N1  - Author contact info:
Nicholas Bloom
Stanford University
Department of Economics
579 Serra Mall
Stanford, CA 94305-6072
Tel: 650/725-3266
Fax: 650/725-5702
E-Mail: nbloom@stanford.edu
AB  - 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.
ER  -