| Summary: | The aggregate behaviour of research expenditure has often been subject to fragmented and partial analyses embedded in wider questions in macroeconomic theory. I combine some of these approaches to create a unified framework under which the relationship between business cycles, economic growth and R&D expenditure can be analysed. In particular, I argue that while the inclusion endogenous technological progress in a classical dynamic general equilibrium model does not greatly improve its performance, it captures important features of the behaviour of research spending along the cycle. Then, using multiple data sources and levels of aggregation, I argue that existing theories of the cyclical pattern of investment in innovative activity are incomplete and propose a more general framework that ties together previous results in the literature. Finally, I develop a theoretical model that captures many of these features and makes additional predictions about the behaviour of research expenditure along the business cycle that can then be explicitly and formally tested.
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