Endogenous innovation scale and patent policy in a monetary Schumpeterian growth model

Po-yang Yu and Ching-chong Lai

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops a monetary R&D-driven endogenous growth model featuring endogenous innovation scales and the price-marginal cost markup. To endogenize the step size of quality improvement, we propose a trade-off mechanism between the risk of innovation failure and the benefit of innovation success in R&D firms. Several findings emerge from the analysis. First, a rise in the nominal interest rate decreases economic growth; however, its relationship with social welfare is ambiguous. Second, either strengthening patent protection or raising the professional knowledge of R&D firms leads to an ambiguous effect on economic growth. Third, the Friedman rule of a zero nominal interest rate fails to be optimal in view of the social welfare maximum. Finally, our numerical analysis indicates that the extent of patent protection and the level of an R&D firm’s professional knowledge play a crucial role in determining the optimal interest rate.

Keywords: intellectual property rights; economic growth; endogenous innovation scales; endogenous markups; inflation (search for similar items in EconPapers)
JEL-codes: E41 L11 O30 O40 (search for similar items in EconPapers)
Date: 2022-10-17
New Economics Papers: this item is included in nep-cmp, nep-ent, nep-fdg, nep-gro, nep-ino, nep-ipr, nep-sbm and nep-tid
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Related works:
Journal Article: Endogenous innovation scale and patent policy in a monetary schumpeterian growth model (2025)
Working Paper: Endogenous innovation scale and patent policy in a monetary Schumpeterian growth model (2023)
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