Uncertainty-Induced Reallocations and Growth

Ravi Bansal, Mariano Croce, Wenxi Liao and Samuel Rosen ()

No 26248, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Focusing on both micro and aggregate U.S. data, we show the existence of a significant link between aggregate uncertainty and reallocation of resources away from R&D-intensive capital. This link is important because a decrease in the aggregate share of R&D-oriented capital forecasts lower medium-term growth. In a multi-sector production economy in which (i) growth is endogenously supported by risky R&D investments, and (ii) the representative agent is volatility-risk averse and has access to other safer technologies that do not support growth, uncertainty shocks have a first-order negative impact on medium-term growth and welfare.

JEL-codes: E3 E6 G18 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-gro, nep-mac and nep-upt
Note: AP EFG PR
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Citations: View citations in EconPapers (9)

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Working Paper: Uncertainty-Induced Reallocations and Growth (2019)
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