In general equilibrium, this effect is reinforced through labor market reallocation.

🧑‍🔬Lower wages of skilled workers during recessions reduce the cost of green R&D, raising green labor demand and increasing green innovation.

9/10

Main channel operating during green transition, as economy moves from few to many green production inputs: "Green is in the future"

💲Green innovation generates profits that are heavily backloaded, making it less sensitive to short-term business cycle fluctuations

8/10

What can explain the differential cyclicality of innovation?

⚙️We develop a medium-run business cycle model with endogenous green and non-green innovation.

👉 Flesh out key mechanisms driving innovation over the business cycle

7/10

Next, we link patent filings to 🇺🇸 Compustat firms and confirm the empirical results.

The green share actually increases within the average firm, while overall patenting declines.

Many more robustness checks in the paper, e.g. international evidence, unlisted firms, etc.

6/10

What drives the increase in the green patent share following the monetary tightening?

📉Number of non-green patents declines

📈But: number of green patents also increases significantly

5/10

🏦 To sharpen identification, we focus on monetary policy shocks.

Monetary tightening (by 25 bp) confirms overall patenting is procyclical, but green share is countercyclical

➕Comparable effects suggest separate discount rate channel plays only a limited role

4/10

We estimate simple local projections: How does a negative “innovation” in GDP growth (by 1%) affect patenting activity over time in 🇺🇸?

📉We find that aggregate innovation declines

📈But: the share of green innovation goes up!

3/10

👋I'm on the #EconJobMarket!

❓My JMP, together with @dkaenzig.bsky.social, Lixing Wang and Donghai Zhang studies how green innovation varies over the business cycle.

💡We find that green innovation is countercyclical, while non-green innovation is procyclical.

🔗https://tinyurl.com/4b45h979

🧵👇