Uncertainty-Induced Reallocations and Growth

60 Pages Posted: 9 Sep 2019

See all articles by Ravi Bansal

Ravi Bansal

Duke University

Mariano (Max) Massimiliano Croce

Finance Department, Bocconi University; Centre for Economic Policy Research (CEPR)

Wenxi Kiao

Duke University

Samuel Rosen

Temple University, Fox School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 2019

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.

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Suggested Citation

Bansal, Ravi and Croce, Mariano Massimiliano and Kiao, Wenxi and Rosen, Samuel, Uncertainty-Induced Reallocations and Growth (September 2019). NBER Working Paper No. w26248, Available at SSRN: https://ssrn.com/abstract=3450274

Ravi Bansal (Contact Author)

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Mariano Massimiliano Croce

Finance Department, Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Wenxi Kiao

Duke University ( email )

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/

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