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Patents and R&D Subsidies in a Two-Sector Schumpeterian Economy

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  • Stojanovikj, Martin

Abstract

This study examines how patent protection, research and development (R&D) subsidies, and their interaction affect economic growth within a vertically integrated (downstream–upstream) Schumpeterian framework. The relative R&D productivity of each sector determines how these policy tools influence innovation and growth. When the upstream R&D sector is relatively more productive, stronger patent breadth and R&D subsidies in that sector promote growth; the same holds for the downstream sector when it is more productive. Within each sector, patents and R&D subsidies act as complements, but they compete across sectors: downstream R&D subsidies amplify the growth effect of downstream patent strength, while reducing gains from upstream patents, and upstream R&D subsidies have the opposite effect. The model is calibrated using U.S. data to quantitatively evaluate the magnitude of these growth effects.

Suggested Citation

  • Stojanovikj, Martin, 2026. "Patents and R&D Subsidies in a Two-Sector Schumpeterian Economy," Economic Modelling, Elsevier, vol. 155(C).
    • Handle: RePEc:eee:ecmode:v:155:y:2026:i:c:s026499932500433x
    DOI: 10.1016/j.econmod.2025.107438
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    Keywords

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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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