Ambiguity attitude, R&D investments and economic growth

Abstract

The process aimed at discovering new ideas is an economic activity whose returns are intrinsically uncertain. In a standard neo-Schumpeterian growth framework we assume that, when deciding upon R&D e¤orts, economic agents hold 'ambiguous beliefs' about the exact probability of arrival of the next vertical innovations, and face ambiguity via the MEU decision rule (Ghirardato et al. (2004)). Along the steady-state equilibrium the higher the agents'ambiguity aversion ( ), the lower the R&D e¤orts and, coeteris paribus, the overall economic performance. Consistently with a cross-country empirical evidence, this causal mechanism suggests that, together with the pro…tability conditions of the economy, di¤erent 'cultural'attitudes towards ambiguity may contribute to explain the di¤erent R&D intensities observed across countries.

Calculation and Empirical Analysis on the Contributions of R&D Spending and Patents to China’s Economic Growth

“…Giordani [3] concluded that in equilibrium, a country with less tolerance to ambiguity usually has less R&D spending, and in the long run, there will be a lag of economic growth compared to a country with more tolerance to ambiguity.…”

Decision makers facing uncertainty: Theory versus evidence

“…In other words, the stronger the feeling of pressure, the higher the worker's willingness to pay to obtain a clearer picture of her choice setting. 4 We then predict that a Bayesian, who feels relatively comfortable in situations of uncertainty, does not feel much pressure and is likely to choose 'not mention'. Both a maximin utility DM 4 Notice that in our model the DM can reduce uncertainty only by participating in a risky bet.…”

Risk aversion in a model of endogenous growth

“…6 Also related, though not dealing with risk aversion as such, are Cozzi and Giordani (2011), who study ambiguity aversion of innovators and find that higher ambiguity aversion leads to lower R&D e↵orts.…”