The refoundation of the symmetric equilibrium in Schumpeterian growth models

Review of Economic Dynamics

2018

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This study explores the e¤ects of patent protection and R&D subsidies on economic growth and income inequality using a Schumpeterian growth model with heterogeneous households. We …nd that although strengthening patent protection and raising R&D subsidies have the same macroeconomic e¤ect of stimulating economic growth, they have drastically di¤erent microeconomic implications on income inequality. Speci…cally, strengthening patent protection increases income inequality whereas raising R&D subsidies decreases (increases) it if the quality step size is su¢ ciently small (large). An empirically realistic quality step size is smaller than the threshold, implying a negative e¤ect of R&D subsidies on income inequality. We also calibrate the model to provide a quantitative analysis and …nd 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 relatively large decrease in both income inequality and consumption inequality.JEL classi…cation: D30, O30, O40

Section: Resultsmentioning

confidence: 99%

Effects of patents versus R&D subsidies on income inequality

Review of Economic Dynamics

2018

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“…We calibrate the R&D cost parameter by targeting the scenario in which domestic innovation drives half of the TFP growth in the US (i.e., g = 0:3%). 15 For the cost of entry, we calibrate by setting the time between arrivals of innovation 1= to about 3 years as in Acemoglu and Akcigit (2012). For the Pareto distribution parameter, we follow Minniti et al (2013) to consider = 0:21 as our benchmark, but we also explore another value = 0:16 that has interesting implications.…”

Section: Quantitative Analysismentioning

confidence: 99%

Inflation and economic growth in a Schumpeterian model with endogenous entry of heterogeneous firms

European Economic Review

Furukawa

et al. 2017

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This study develops a Schumpeterian growth model with endogenous entry of heterogeneous …rms to analyze the e¤ects of monetary policy on economic growth via a cash-in-advance constraint on R&D investment. Our results can be summarized as follows. In the special case of a zero entry cost, an increase in the nominal interest rate decreases R&D, the arrival rate of innovations and economic growth as in previous studies. However, in the general case of a positive entry cost, an increase in the nominal interest rate a¤ects the distribution of innovations that are implemented and would have an inverted-U e¤ect on economic growth if the entry cost is su¢ ciently large. We also calibrate the model to aggregate data of the US economy and …nd that the growth-maximizing in ‡ation rate is about 3%, which is consistent with recent empirical estimates.JEL classi…cation: O30, O40, E41

“…Z h t denotes aggregate technology in country h capturing the e¤ect of increasing innovation complexity. 26 This formulation of increasing R&D di¢ culty also removes scale e¤ects in the innovation process as in Segerstrom (1998). 27 The parameter 2 [0; 1) measures the degree of R&D duplication externality as in Jones and Williams (2000).…”

mentioning

confidence: 97%

Inflation, R&D and growth in an open economy

Journal of International Economics

Lai

et al. 2015

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This study explores the long-run e¤ects of in ‡ation in a two-country Schumpeterian growth model with cash-in-advance constraints on consumption and R&D investment. We …nd that increasing domestic in ‡ation reduces domestic R&D investment and the growth rate of domestic technology. Given that economic growth in a country depends on both domestic and foreign technologies, increasing foreign in ‡ation also a¤ects the domestic economy. When each government conducts its monetary policy unilaterally to maximize the welfare of domestic households, the Nash-equilibrium in ‡ation rates are generally higher than the optimal in ‡ation rates chosen by cooperative governments who maximize the welfare of both domestic and foreign households. Under the CIA constraint on R&D (consumption), a larger market power of …rms ampli…es (mitigates) this in ‡ationary bias. We use cross-country panel data to estimate the e¤ects of in ‡a-tion on R&D and also calibrate the two-country model to data in the Euro Area and the US to quantify the welfare e¤ects of decreasing the in ‡ation rates from the Nash equilibrium to the optimal level.JEL classi…cation: O30, O40, E41, F43