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Working Paper
On the cyclicality of R&D: disaggregated evidence
This paper explores the link between short-run cycles and long-run growth by> examining the cyclical properties of R&D at the disaggregated industry level.> The relationship between R&D and output is estimated using an annual panel of> 20 U.S. manufacturing industries from 1958 to 1998. The results indicate that> R&D is in fact procyclical; but interestingly, estimates using demand-shift> instruments suggest that it responds asymmetrically to demand shocks. We> discuss the possibilities that liquidity constraints and technology> improvement cause the observed procyclicality of R&D.