Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247178 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 909
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
Following an unparalleled rise in uncertainty over the Great Recession, the US economy has been experiencing anaemic productivity growth. This paper offers a quantitative study on the link between uncertainty and low productivity growth. Firstly, using micro level data I show that uncertainty accounts for half of the drop in intangible capital stock during the Great Recession. Secondly, to investigate the effect of uncertainty on productivity growth dynamics, I present a novel general equilibrium endogenous growth model with heterogeneous firms that undertake intangible capital investment subject to non-convex costs and time-varying uncertainty. I show that uncertainty can generate slow recoveries and a persistent slowdown in productivity growth when accounting for the empirical discrepancy between the realised and expected changes to the second-moment of fundamentals.
Subjects: 
Uncertainty
R&D
Innovation
Productivity
Great Recession
Intangible Capital
Slow Recoveries
JEL: 
O40
O41
O51
Document Type: 
Working Paper

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