An endogenous growth model with R&D uncertainty

Abstract

This thesis investigates the interplay between uncertainty, technological innovations, and economic growth in an overlapping-generations model. By introducing random shocks into the process of an expanding variety of intermediate products, the analysis provides insight into the potential connection between research and development (R&D) uncertainty and economic growth in a stochastic version of Romer's model of technological change. Overall, the thesis presents a new perspective on studying the effects of short-run shocks on long-run growth through R&D activities. The comparative analyses show that long-run mean growth is sensitive to factors such as rate of intertemporal substitution, variance of exogenous shocks, and persistence of shocks.