R&D Heterogeneity and Countercyclical Productivity Dispersion

2021/08/04 by Shuowen Chen, Yang Ming, Chen, Shuowen +1
Economics, Econometrics and Finance · #Economic Growth and Productivity #FOS: Economics and business #Firm Innovation and Growth #General Economics (econ.GN) #Global trade and economics

paper · pdf · doi:10.48550/arxiv.2108.02272

openalex publication_date 2021/08/04 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

Why is the U.S. industry-level productivity dispersion countercyclical? Theoretically, we build a duopoly model in which heterogeneous R&D costs determine firms' optimal behaviors and the equilibrium technology gap after a negative profit shock. Quantitatively, we calibrate a parameterized model, simulate firms' post--shock responses and predict that productivity dispersion is due to the low-cost firm increasing R&D efforts and the high-cost firm doing the opposite. Empirically, we construct an index of negative profit shocks and provide two reduced-form tests for this mechanism.

Citations

• Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data
• Estimation and Inference of Impulse Responses by Local Projections
• Longitudinal data analysis using generalized linear models

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