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Endogenous Economic Growth with Disembodied Knowledge

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Abstract

Mainstream endogenous growth models assume that new knowledge is embodied into new intermediate or final goods, monopolistically supplied by the patent holder. Recent technological progress, however, often gives rise to pure intellectual contents, such as software codes or business models, directly usable in the production of final goods. Once a content of this type has been produced, it is in fixed supply, that is, the inventor can only rent it out (or sell it) or not; hence the quantity restriction typical of monopoly cannot arise, while competition is viable (Chantrel et al., 2012; Marchese and Privileggi, 2014). We show that, however, as long as the inventor owning a patent can control through license activation devices the access to the intellectual content of the workers using her invention in the final goods production, monopolistic exploitation becomes viable and will occur. It turns out that in this framework both the level of wages and of consumption and the rate of growth of the economy are smaller than in the first best, while with elastic labor supply also labor employment is negatively impacted. This implies that some standard public policies devised for correcting ineciencies in development can perform poorly in this framework.

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  • Marchese, carla & Privileggi, Fabio, 2015. "Endogenous Economic Growth with Disembodied Knowledge," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201525, University of Turin.
  • Handle: RePEc:uto:dipeco:201525
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    1. Étienne Chantrel & Andre Grimaud & Frederic Tournemaine, 2012. "Pricing Knowledge and Funding Research of New Technology Sectors in a Growth Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(3), pages 493-520, June.
    2. Marchese, Carla & Privileggi, Fabio, 2014. "A Competitive Idea-Based Growth Model with Shrinking Workers' Income," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201415, University of Turin.
    3. Boldrin, Michele & Levine, David K., 2008. "Perfectly competitive innovation," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 435-453, April.
    4. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
    5. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 61-103.
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-784, August.
    8. Michele Boldrin & David K. Levine, 2013. "The Case against Patents," Journal of Economic Perspectives, American Economic Association, vol. 27(1), pages 3-22, Winter.
    9. Andrew Eckert & Corinne Langinier, 2014. "A Survey Of The Economics Of Patent Systems And Procedures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 996-1015, December.
    10. Taylor, Curtis R, 1995. "Digging for Golden Carrots: An Analysis of Research Tournaments," American Economic Review, American Economic Association, vol. 85(4), pages 872-890, September.
    11. Marchese, Carla & Marsiglio, Simone & Privileggi, Fabio & Ramello, Giovanni, 2014. "Endogenous Recombinant Growth through Market Production of Knowledge and Intellectual Property Rights," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201413, University of Turin.
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