We study and endogenous growth model where a profit-motivated R&D sector coexists with the introduction of free blueprints invented by philanthropists. These goods are priced at marginal cost, contrary to proprietary ones, which are produced by a monopoly owned by the inventor. We show that philanthropy does not necessarily increase long-run growth and that it may even reduce welfare. The reason is that it crowds our proprietary innovation, which on net may reduce total innovation in the long run. These effects would be reinforced if philanthropical inventors sometimes came out with another version of an existing proprietary good. Dynamics can also be characterized and it is shown that the impact effect of free inventions on growth is positive.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
3069.
Find related papers by JEL classification: L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
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