Examination and Approval of New Products in an Endogenous Growth Model

Kiyoka Akimoto () and Takaaki Morimoto ()
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Kiyoka Akimoto: Graduate School of Economics, Osaka University
Takaaki Morimoto: Graduate School of Economics, Osaka University

No 17-33, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper introduces examination of newly developed varieties into a standard gvariety expansion h and glab-equipment h type R&D-based growth model. Producing newly developed varieties requires approval, and their examination incurs both cost and time. Reducing the examination duration increases the unit cost of examination. This paper investigates the effects of reducing the examination duration on examination backlogs (the number of varieties under examination), economic growth, and welfare. Examination backlogs and examination duration have an inverted-U shaped relationship, because reducing the examination duration on the one hand decreases the examination backlogs by accelerating the examination process, but on the other hand increases backlogs by promoting R&D and increasing the number of applications. Reducing the examination duration promotes economic growth; while it tightens the resource constraint and thus seems to hurt initial consumption, but the numerical analysis shows that this is not always the case. Nevertheless, a drastic reduction in the examination duration is detrimental to initial consumption, so there is an optimal examination duration.

Keywords: Endogenous growth; R&D; Examination duration (search for similar items in EconPapers)
JEL-codes: O31 O34 O38 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-11
New Economics Papers: this item is included in nep-gro
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