Patents' novelty requirement and endogenous growth
In this paper, I develop and endogenous quality ladders growth model, in which the patent Office imposes a novelty requirement for innovations. The size of innovations realized by firms are heterogeneous and drawn from a probability distribution. They determine the price setting behaviour of firms: limit pricing strategy if innovation is non-drastic, or monopoly pricing without constraint if it is a drastic one. Both monopoly configurations are possible for a sector, depending on the size of the innovation in vigour. The aggregation of all the industries in the economy enables to exhibit the proportion of sectors in each case and the strength of competitive pressure in the economy. The patent’s novelty requirement has an effect both on the average height of innovations and the economy’s market structure of the economy. Patent height stands to be an instrument for regulating innovation and growth. We explore its effects on welfare and ressources allocation to research activity and discuss its implications for competition and market structure.
Volume (Year): 114 (2004)
Issue (Month): 2 ()
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- Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.