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Patents versus R&D subsidies in a Schumpeterian growth model with endogenous market structure

Chu, Angus C. and Furukawa, Yuichi (2012): Patents versus R&D subsidies in a Schumpeterian growth model with endogenous market structure.

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Abstract

This letter explores the different implications of patent breadth and R&D subsidies on economic growth and endogenous market structure in a Schumpeterian model. We find that the two policy instruments have the same positive effect on economic growth when the model exhibits scale effects under a fixed number of firms. When the model becomes scale-invariant under an endogenous number of firms, patent breadth increases economic growth but decreases the number of firms, whereas R&D subsidies increase the number of firms but decrease economic growth.

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