Animal spirits and the composition of innovation in a lab-equipment R&D model with transition

Journal of Economics, 2013, vol. 108, issue 1, 33 pages

Abstract: We study the effect of animal spirits on the composition of aggregate R&D, the consumption level and economic growth in a tournament model of horizontal and vertical R&D. By considering a full lab-equipment specification, the model predicts a positive effect of animal spirits on the balanced-growth-path (BGP) level of per-capita consumption without impacting on economic growth and on aggregate vertical R&D. However, transition is slower under “waves of enthusiasm”, implying a longer period in which growth rates are higher than the BGP level. An economy that is subject to expectations shocks then converges at a time-varying speed. On average over time, transition is longer but less “painful”—i.e., with higher per-capita consumption levels—than otherwise. Copyright Springer-Verlag 2013

Keywords: Animal spirits; Endogenous growth; Horizontal and vertical R&D; Time-varying speed of transition; O41; E32; D43; L16 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Working Paper: Animal Spirits and the Composition of Innovation in a Lab-Equipment R&D Model with Transition (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:108:y:2013:i:1:p:1-33

DOI: 10.1007/s00712-012-0266-8

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