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Patentability and Knowledge Spillovers of Basic R&D

  • Angus C. Chu


    (Durham University Business School, Durham University, Durham, UK; and School of Economics, Shanghai University of Finance and Economics, Shanghai, China)

  • Yuichi Furukawa


    (School of Economics, Chukyo University, Nagoya, Japan; and Department of Economics, Simon Fraser University, Burnaby, Canada; corresponding author)

This study develops a research and development (R&D)–based growth model with basic and applied research to analyze the growth and welfare effects of two patent instruments: (i) the patentability of basic R&D and (ii) the division of profit between basic and applied researchers. We find that for the purpose of stimulating basic R&D and economic growth simultaneously, increasing the share of profit assigned to basic researchers is more effective than raising the patentability of basic R&D, which has either a negative effect or an inverted-U effect on technological progress. However, a benevolent patent authority requires both patent instruments to achieve the socially optimal allocation in the decentralized economy.

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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 79 (2013)
Issue (Month): 4 (April)
Pages: 928-945

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Handle: RePEc:sej:ancoec:v:79:4:y:2013:p:928-945
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