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Optimal mix of R&D subsidy and patent protection in a heterogeneous-industry R&D-based growth model

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  • Iwaisako, Tatsuro

Abstract

This paper constructs an R&D-based endogenous growth model with heterogeneous industries in which the parameters, including the contribution of R&D to productivity, differ by industry. Using this model to examine the optimal mix of R&D subsidies and patent protection, we obtain the following results. First, R&D subsidies should be set higher (lower) in industries with a higher (lower) contribution of R&D to productivity, whereas patent breadth should be set such that markups are uniform across all industries. Second, we derive the optimal mix in the situation where R&D subsidies and patent protection are uniform across industries and numerically show that the uniform constraint on R&D subsidies involves significant growth and welfare losses and that greater heterogeneity across industries significantly magnifies them.

Suggested Citation

  • Iwaisako, Tatsuro, 2023. "Optimal mix of R&D subsidy and patent protection in a heterogeneous-industry R&D-based growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:dyncon:v:154:y:2023:i:c:s016518892300129x
    DOI: 10.1016/j.jedc.2023.104723
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    More about this item

    Keywords

    Endogenous growth; Heterogeneous-industry model; Patent protection; R&D subsidies;
    All these keywords.

    JEL classification:

    • 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
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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