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Patents vs R&D Subsidies on Income Inequality

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  • Chu, Angus C.
  • Cozzi, Guido

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 heterogeneity in household asset holdings. 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 significant decrease in both income inequality and consumption inequality.

Suggested Citation

  • Chu, Angus C. & Cozzi, Guido, 2016. "Patents vs R&D Subsidies on Income Inequality," MPRA Paper 73482, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:73482
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    Cited by:

    1. Chen, Ping-ho & Chu, Angus C. & Chu, Hsun & Lai, Ching-Chong, 2019. "Optimal Capital Taxation in an Economy with Innovation-Driven Growth," MPRA Paper 92319, University Library of Munich, Germany.
    2. repec:eee:eecrev:v:111:y:2019:i:c:p:191-210 is not listed on IDEAS
    3. Angus C. Chu & Guido Cozzi & Haichao Fang & Yuichi Furukawa & Chih-Hsing Liao, 2019. "Innovation and Inequality in a Monetary Schumpeterian Model with Heterogeneous Households and Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 141-164, October.
    4. Aysun, Uluc & Kabukcuoglu, Zeynep, 2019. "Interest rates, R&D investment and the distortionary effects of R&D incentives," European Economic Review, Elsevier, vol. 111(C), pages 191-210.
    5. Chu, Angus C. & Cozzi, Guido & Furukawa, Yuichi & Liao, Chih-Hsing, 2018. "Should the Government Subsidize Innovation or Automation?," MPRA Paper 88276, University Library of Munich, Germany.
    6. Chu, Angus C. & Wang, Xilin, 2019. "Effects of R&D Subsidies in a Hybrid Model of Endogenous Growth and Semi-Endogenous Growth," MPRA Paper 94620, University Library of Munich, Germany.

    More about this item

    Keywords

    R&D subsidies; patents; income inequality; economic growth;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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