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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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  12. Jakob Madsen, 2008. "Semi-endogenous versus Schumpeterian growth models: testing the knowledge production function using international data," Journal of Economic Growth, Springer, vol. 13(1), pages 1-26, March.
  13. Chu, Angus C. & Furukawa, Yuichi, 2010. "On the optimal mix of patent instruments," MPRA Paper 24039, University Library of Munich, Germany.
  14. Joonkyung Ha & Peter Howitt, 2007. "Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 733-774, 06.
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  23. Gene M. Grossman & Elhanan Helpman, 1989. "Quality Ladders in the Theory of Growth," NBER Working Papers 3099, National Bureau of Economic Research, Inc.
  24. 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.
  25. Pietro Peretto & Michelle Connolly, 2007. "The Manhattan Metaphor," Journal of Economic Growth, Springer, vol. 12(4), pages 329-350, December.
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  30. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
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