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Patents versus R&D subsidies in a Schumpeterian growth model with endogenous market structure

  • Chu, Angus C.
  • Furukawa, Yuichi

In this note, we explore the different implications of patent breadth and R&D subsidies on economic growth and endogenous market structure in a Schumpeterian growth model. We find that these two policy instruments have the same positive effect on economic growth when the model exhibits counterfactual scale effects under an exogenous number of firms. However, when the model becomes scale-invariant under an endogenous number of �firms, R&D subsidies increase economic growth but decrease the number of firms, whereas patent breadth expands the number of firms but reduces economic growth. Therefore, R&D subsidy is perhaps a more suitable policy instrument than patent breadth for the purpose of stimulating economic growth.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41083.

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Date of creation: Aug 2012
Date of revision: Sep 2012
Handle: RePEc:pra:mprapa:41083
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  4. Federico Etro, 2012. "Endogenous Market Structures and Welfare," Working Papers 2012_12, Department of Economics, University of Venice "Ca' Foscari".
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  6. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  7. Peretto, Pietro F, 1996. "Sunk Costs, Market Structure, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 895-923, November.
  8. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," Working papers 527, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Ryo Horii & Tatsuro Iwaisako, 2005. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Discussion Papers in Economics and Business 05-23, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  10. James Bessen & Michael J. Meurer, 2008. "Introduction to Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk
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  11. Pietro Peretto & Michelle Connolly, 2007. "The Manhattan Metaphor," Journal of Economic Growth, Springer, vol. 12(4), pages 329-350, December.
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  13. Chu, Angus C. & Furukawa, Yuichi, 2011. "On the optimal mix of patent instruments," Journal of Economic Dynamics and Control, Elsevier, vol. 35(11), pages 1964-1975.
  14. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  15. Peretto, Pietro F, 1998. " Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
  16. Furukawa, Yuichi, 2010. "Intellectual property protection and innovation: an inverted-U relationship," Economics Letters, Elsevier, vol. 109(2), pages 99-101, November.
  17. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  18. Richard Gilbert and Carl Shapiro., 1989. "Optimal Patent Length and Breadth," Economics Working Papers 89-102, University of California at Berkeley.
  19. Ted O'Donoghue & Josef Zweim¸ller, 2004. "Patents in a Model of Endogenous Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 81-123, 03.
  20. Michele Boldrin & David K Levine, 2008. "Against Intellectual Monopoly," Levine's Bibliography 122247000000002371, UCLA Department of Economics.
  21. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2010. "Does intellectual monopoly stimulate or stifle innovation?," MPRA Paper 29061, University Library of Munich, Germany.
  22. Chu, Angus C. & Pan, Shiyuan & Sun, Minjuan, 2012. "When does elastic labor supply cause an inverted-U effect of patents on innovation?," Economics Letters, Elsevier, vol. 117(1), pages 211-213.
  23. Christopher Laincz & Pietro Peretto, 2006. "Scale effects in endogenous growth theory: an error of aggregation not specification," Journal of Economic Growth, Springer, vol. 11(3), pages 263-288, September.
  24. Tatsuro Iwaisako & Koichi Futagami, 2013. "Patent protection, capital accumulation, and economic growth," Economic Theory, Springer, vol. 52(2), pages 631-668, March.
  25. Angus Chu, 2009. "Effects of blocking patents on R&D: a quantitative DGE analysis," Journal of Economic Growth, Springer, vol. 14(1), pages 55-78, March.
  26. Furukawa, Yuichi, 2007. "The protection of intellectual property rights and endogenous growth: Is stronger always better?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3644-3670, November.
  27. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
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