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Macro-Institutional Instability and the Incentive to Innovate

Masino, Serena (2013): Macro-Institutional Instability and the Incentive to Innovate.

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This paper investigates the channels through which macroeconomic and institutional instability prevents or hinders innovative investment undertakings financed by the domestic private sector. The analysis is based on a sample of 44 countries representing all levels of development and considers a number of instability dimensions. The results suggest a negative impact of real, monetary and political instability on the aggregate level of national R&D financed by the business sector. Thus, they highlight the desirability of stable macro-institutional environments in preventing avoidance or abandonment of private innovation undertakings.

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