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Effects of Patents versus R&D subsidies on Income Inequality

Author

Listed:
  • Angus Chu

    (Fudan University)

  • Guido Cozzi

    (University of St. Gallen)

Abstract

This study explores the effects of patent protection and R&D subsidies on economic growth and income inequality using a Schumpeterian growth model with heterogeneous households. We find that although strengthening patent protection and raising R&D subsidies have the same macroeconomic effect of stimulating economic growth, they have drastically different microeconomic implications on income inequality. Specifically, strengthening patent protection increases income inequality whereas raising R&D subsidies decreases (increases) it if the quality step size is sufficiently small (large). An empirically realistic quality step size is smaller than the threshold, implying a negative effect of R&D subsidies on income inequality. We also calibrate the model to provide a quantitative analysis and find that strengthening patent protection causes a moderate increase in income inequality and a negligible increase in consumption inequality whereas raising R&D subsidies causes a relatively large decrease in both income inequality and consumption inequality. (Copyright: Elsevier)

Suggested Citation

  • Angus Chu & Guido Cozzi, 2018. "Effects of Patents versus R&D subsidies on Income Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 68-84, July.
    • Handle: RePEc:red:issued:17-109
    DOI: 10.1016/j.red.2017.12.006
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    More about this item

    Keywords

    R&D subsidies; Patents; Income inequality; Economic growth;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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