Uncertainty-Induced Reallocations and Growth

57 Pages Posted: 18 Nov 2016 Last revised: 5 Dec 2017

See all articles by Ravi Bansal

Ravi Bansal

Duke University and NBER

Mariano (Max) Massimiliano Croce

Finance Department, Bocconi University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of North Carolina Kenan-Flagler Business School

Wenxi Liao

Fuqua School of Business, Duke University

Samuel Rosen

Temple University, Fox School of Business

Date Written: December 4, 2016

Abstract

Focusing on U.S. data, we show the existence of a significant positive link between uncertainty and reallocation of resources from private R&D-intensive firms to both tangible private capital and government capital. This link is important because a decrease in the aggregate share of private R&D-oriented capital forecasts lower medium-term growth. We rationalize these novel empirical findings in a multi-sector production economy in which (i) growth is endogenously supported by risky R&D investments, (ii) the government accumulates capital that, at the equilibrium, is safe; and (iii) the representative agent has an explicit fear toward uncertainty.

Keywords: Uncertainty shocks, Reallocation, Safe Public Capital

JEL Classification: E3; E6; G18

Suggested Citation

Bansal, Ravi and Croce, Mariano Massimiliano and Liao, Wenxi and Rosen, Samuel, Uncertainty-Induced Reallocations and Growth (December 4, 2016). Available at SSRN: https://ssrn.com/abstract=2872105 or http://dx.doi.org/10.2139/ssrn.2872105

Ravi Bansal

Duke University and NBER ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7758 (Phone)
919-660-8038 (Fax)

Mariano Massimiliano Croce (Contact Author)

Finance Department, Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

HOME PAGE: http://sites.google.com/view/mmcroce/home

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of North Carolina Kenan-Flagler Business School ( email )

McColl Builiding
Chapel Hill, NC North Carolina 27599-3490
United States

HOME PAGE: http://https://sites.google.com/view/mmcroce/home

Wenxi Liao

Fuqua School of Business, Duke University ( email )

Durham, NC
United States

Samuel Rosen

Temple University, Fox School of Business ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States

HOME PAGE: http://sites.google.com/view/samuel-rosen/

Register to save articles to
your library

Register

Paper statistics

Downloads
198
Abstract Views
1,227
rank
151,323
PlumX Metrics