DP6075 Research Cycles

Author(s): Yann Bramoullé , Gilles Saint-Paul

Publication Date: February 2007

Keyword(s): research dynamics , innovation cycles , indeterminacy

JEL(s): C61 , O39

Programme Areas: International Macroeconomics , Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP6075.asp.asp

This paper studies the dynamics of fundamental research. We develop a simple model where researchers allocate their effort between improving existing fields and inventing new ones. A key assumption is that scientists derive utility from recognition from other scientists. We show that the economy can be either in a regime where new fields are constantly invented, and then converges to a steady state, or in a cyclical regime where periods of innovation alternate with periods of exploitation. We characterize the cyclical dynamics of the economy, show that indeterminacy may appear, and establish some comparative statics and welfare implications.