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Intra-sector and inter-sector competition in a model of growth

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  • Di Cintio, Marco
  • Grassi, Emanuele

Abstract

The role of patents is threefold: first, they are important to state the property rights of an invention; second, they are necessary to secure financing for starting a new venture; third, they are fundamental to recoup R&D investments. The main difficulty in preventing unauthorized use of an innovation is in the establishment of ranges and contexts of patents applicability. Noting the imperfections of the patent legal system, the authors are in a position to consider an economy with two levels of competition under different market structures: the inter-sector monopolistic competition and the intra-sector Cournot oligopoly. The explicit consideration of strategic interactions in a model of endogenous growth produces interesting results. Considering the sectorial market share as the indicator of patent system enforcement, the authors find that growth takes place, if and only if, there are some property rights of private knowledge produced by R&D activities. In turn, the patent system translates into a low degree of competition among firms. Its influence on the growth rate goes in a single unambiguous direction. As competition rises, few resources are available for R&D, so the growth rate goes down.

Suggested Citation

  • Di Cintio, Marco & Grassi, Emanuele, 2015. "Intra-sector and inter-sector competition in a model of growth," Economics Discussion Papers 2015-49, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201549
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    References listed on IDEAS

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    More about this item

    Keywords

    product differentiation; endogenous growth; market structure; R&D;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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