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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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  13. 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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