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Min
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Home | Curriculum Vitae | Research | Econ20b
| Econ105C | Econ
210F |
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Working Papers and Journal Publications Capital-good
R&D and the Input-output Linkage, coming soon. We show the
comovement between capital-good R&D and the rest of the economy is what drives
aggregate R&D pro-cyclical, and the input-output linkage contributes to
such comovement. In particular, capital-good R&D co-moves with output by
industries that either demands capital goods or serves as intermediate
suppliers for capital-good production.
Such comovement related to the input-output linkage helps to account
for over 50% aggregate R&D’s procyclicality, and amplifies aggregate
fluctuations by about 15%. We propose an economy’s input-output structure as
an important factor on the link between short-run cycles and long-run growth. Cyclical Persistence and the Cyclicality of
R&D, March, 2011. Abstract We propose cyclical persistence
as an important factor influencing the link between short-run cycles and long-run
growth, through the cyclicality of R&D. A simple theory is presented,
suggesting that higher persistence can drive R&D pro-cyclical by raising
the cyclicality of innovation’s expected marginal return relative to that of
its marginal opportunity cost. Our theory is carried to an industry panel of
R&D and output. We find that cyclical persistence can account for about
half of the observed variation in industry R&D’s cyclicality. Virtue
of Bad Times and Financial Market Frictions, under
revision Abstract We revisit the "virtue of
bad times" theoretically and empirically. Our theory suggests that
recessions have such virtue only when the cyclicality of innovation's
marginal opportunity cost dominates that of its marginal expected return; but
binding financial constraints can hinder such virtue, preventing innovation
from rising during recessions. Our theory is carried to an industry panel of
production and innovation. Our evidence suggests that recessions indeed have
potential virtue, but such virtue is hindered by financial-market frictions. Pro-cyclical Aggregate R&D: A Comovement Phenomenon, Abstract Pro-cyclical aggregate R&D has
been taken as evidence against the conventional Schumpeterian view on the optimal
timing of innovation. This note decomposes aggregate R&D and real GDP in
the U.S. into those by 22 industry groups. Surprisingly, we find only 5.67%
of pro-cyclical aggregate R&D reflects within-industry timing of
innovation and production, but 94.37% arises from inter-industry co-movement
between R&D and output. We posit pro-cyclical aggregate R&D, just
like the business cycle itself, is a comovement phenomenon. R&D, Liquidity Constraint, and the Schumpeterian
View, Abstract The literature has reached the
consensus that pro-cyclical R&D is inconsistent with the Schumpeterian
view that predicts innovation to be concentrated during downturns. However,
authors disagree on whether liquidity constraint is the explanation. Based on
an industry panel of R&D, output, and finance, we document vast
differences in industry R&D’s cyclicality and find liquidity constraint
serves as a useful but not the only explanation. Our results suggest the
Schumpeterian view does capture important aspects of innovation’s cyclical
behavior, but its potential consistency with data is masked by many factors
including liquidity constraint. On the Cyclicality of R&D , forthcoming,
Review of Economics and Statistics This version, October 2009, previous version as Cleveland-Fed
working paper 07-07R. Abstract: This
paper explores the link between short-run cycles and long-run growth by
examining the cyclicality of R&D. Existing theories propose that R&D is
concentrated when output is low; but aggregate data repeatedly show that
R&D appears pro-cyclical. We estimate the relationship between R&D
and output at the disaggregated industry level, using an annual panel of 20 The Scarring Effect of
Recessions, Journal of Monetary Economics 56(2009), 184-199. Appendix Abstract: According to the conventional Schumpeterian
view, recessions improve resource allocation by driving out less productive
producers. We posit that recessions bring an additional scarring effect by
impeding the developments of potentially superior producers, which can be
destroyed during their infancy and never realize their potential. A model
combining creative destruction with learning is developed to capture both the
cleansing and scarring effects. A key ingredient of our model is that
idiosyncratic productivity is not directly observable, but can be learned
over time. When calibrated with statistics on productivity and on cyclical
entry and exit, the model suggests that the scarring effect can dominate the
cleansing effect, and can give rise to lower average productivity during
recessions. Plant Life Cycle and Aggregate Employment Dynamics, Forthcoming, Macroeconomic
Dynamics Appendix. Abstract: Past
empirical studies have repeatedly found that plant age matters for aggregate employment
dynamics. This paper develops a model of plant life cycle to capture this
empirical regularity. In the model, plants differ by vintage and by
idiosyncratic productivity. The idiosyncratic productivity is not directly
observable, but can be learnt over time. This setup gives rise to a learning
effect and a creative destruction effect, under which labor flows from plants
with low idiosyncratic productivity to those with high idiosyncratic
productivity and from old vintages to new vintages. When calibrated to the |
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