AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
R&D Uncertainty and Cycles
AEA Papers and Proceedings
(pp. 504–509)
Abstract
Investment in equipment and structures is one of the most cyclical components of GDP, a fact often associated with a negative response to heightened uncertainty in recessions. R&D investment, by contrast, is only mildly procyclical. We show that this difference could arise because of a positive response of R&D investment to uncertainty promoting more research, development, and experimentation, a feature of most recessions but most notably during COVID-19. Both effects are distinct manifestations of real options, one in which costly reversibility delays investment, and the other in which investment enhances resolution of uncertainty.Citation
Crouzet, Nicolas, and Janice Eberly. 2026. "R&D Uncertainty and Cycles." AEA Papers and Proceedings 116: 504–509. DOI: 10.1257/pandp.20261081Additional Materials
JEL Classification
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- E32 Business Fluctuations; Cycles
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- I12 Health Behavior