Hostname: page-component-758b78586c-kdfvs Total loading time: 0 Render date: 2023-11-28T08:22:49.470Z Has data issue: false Feature Flags: { "corePageComponentGetUserInfoFromSharedSession": true, "coreDisableEcommerce": false, "useRatesEcommerce": true } hasContentIssue false


Published online by Cambridge University Press:  14 November 2018

Vahagn Jerbashian*
University of Barcelona, BEAT, and CERGE-EI
Address correspondence to: Vahagn Jerbashian, University of Barcelona, Av. Diagonal 696, 08034 Barcelona, Spain; e-mail: Phone: +34934034890.


I analyze the impact of intellectual property and product market competition regulations on innovation and long-run growth in an endogenous growth model with two R&D performing sectors. I show that strengthening intellectual property rights and competition in a sector increases its R&D investments. However, these policies adversely affect R&D investments in the other sector because of increased factor competition between the sectors. As a result, the overall impact of such policies on economic growth is ambiguous. I perform a numerical exercise in an attempt to resolve this ambiguity. This exercise suggests that strengthening intellectual property rights increases economic growth, but higher competition has a very limited effect on growth.

© Cambridge University Press 2018

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


I would like to thank three anonymous referees, Marta Aloi, Stefan Bechtold, Pedro Mazeda Gil, Xavier Raurich, Marc Teignier and seminar participants at the Munich Summer Institute (2017), the Armenian Economic Association Meetings (2017), the HenU/INFER Workshop on Applied Macroeconomics (2017), and the University of Barcelona (2016) for thoughtful comments. I gratefully acknowledge the financial support from the Spanish Ministry of Education and Science through grant ECO2015-66701-R, from the Generalitat of Catalonia through grant 2014SGR493, and from the Grant Agency of the Czech Republic through project P402/12/G097. All errors remain my own. CERGE-EI is a joint workplace of the Center for Economic Research and Graduate Education, Charles University in Prague, and the Economics Institute of Academy of Sciences of the Czech Republic.


Acemoglu, D., Akcigit, U. and Kerr, W. R. (2016) Innovation networks. Proceedings of the National Academy of Sciences 113(41), 1148311488.CrossRefGoogle Scholar
Aghion, P. and Howitt, P. (1992) A model of growth through creative destruction. Econometrica 60(2), 323351.CrossRefGoogle Scholar
Aghion, P., Bloom, N., Blundell, R., Griffith, R. and Howitt, P. (2005) Competition and innovation: An inverted-U relationship. Quarterly Journal of Economics 120(2), 701728.Google Scholar
Akcigit, U., Celik, M. A. and Greenwood, J. (2016) Buy, keep, or sell: Economic growth and the market for ideas. Econometrica 84(3), 943984.CrossRefGoogle Scholar
Bartelsman, E. J. and Doms, M. (2000) Understanding productivity: Lessons from longitudinal microdata. Journal of Economic Literature 38(3), 569594.CrossRefGoogle Scholar
Blundell, R., Griffith, R. and van Reenen, J. M. (1999) Market share, market value and innovation in a panel of British manufacturing firms. Review of Economic Studies 66(3), 529554.CrossRefGoogle Scholar
Chang, H. F. (1995) Patent scope, antitrust policy, and cumulative innovation. RAND Journal of Economics 26(1), 3457.CrossRefGoogle Scholar
Chantrel, E., Grimaud, A. and Tournemaine, F. (2012) Pricing knowledge and funding research of new technology sectors in a growth model. Journal of Public Economic Theory 14(3), 493520.CrossRefGoogle Scholar
Chu, A. C. (2009) Effects of blocking patents on R&D: A quantitative DGE analysis. Journal of Economic Growth 14(1), 5578.CrossRefGoogle Scholar
Chu, A. C. (2011) The welfare cost of one-size-fits-all patent protection. Journal of Economic Dynamics and Control 35(6), 876890.CrossRefGoogle Scholar
Chu, A. C. and Pan, S. (2013) The escape-infringement effect of blocking patents on innovation and economic growth. Macroeconomic Dynamics 17(04), 955969.CrossRefGoogle Scholar
Claessens, S. and Laeven, L. (2003) Financial development, property rights, and growth. Journal of Finance 58(6), 24012436.CrossRefGoogle Scholar
Eggertsson, G., Ferrero, A. and Raffo, A. (2014) Can structural reforms help Europe? Journal of Monetary Economics 61, 222.CrossRefGoogle Scholar
Forni, L., Gerali, A. and Pisani, M. (2010) Macroeconomic effects of greater competition in the service sector: The case of Italy. Macroeconomic Dynamics 14(5), 677708.CrossRefGoogle Scholar
Foster, L., Haltiwanger, J. C. and Syverson, C. (2008) Reallocation, firm turnover, and efficiency: Selection on productivity or profitability? American Economic Review 98(1), 394425.CrossRefGoogle Scholar
Futagami, K. and Iwaisako, T. (2007) Dynamic analysis of patent policy in an endogenous growth model. Journal of Economic Theory 132(1), 306334.CrossRefGoogle Scholar
Gilbert, R. and Shapiro, C. (1990) Optimal patent length and breadth. RAND Journal of Economics 21(1), 106112.CrossRefGoogle Scholar
Goh, A. and Olivier, J. (2002) Optimal patent protection in a two-sector economy. International Economic Review 43(4), 11911214.CrossRefGoogle Scholar
Griffith, R., Harrison, R. and Simpson, H. (2010) Product market reform and innovation in the EU. Scandinavian Journal of Economics 112(2), 389415.CrossRefGoogle Scholar
Jerbashian, V. (2016) Knowledge licensing in a model of R&D-driven endogenous growth. B.E. Journal of Macroeconomics 16(2), 555579.Google Scholar
Jerbashian, V., S., Slobodyan and Vourvachaki, E. (2016) On the Industry Specificity of Human Capital and Business Cycles. UB Economics Working Papers: No. 2016/335.CrossRefGoogle Scholar
Jones, C. I. (1999) Growth: With or without scale effects? American Economic Review 89(2), 139144.CrossRefGoogle Scholar
Jones, C. I. and Romer, P. M. (2010) The new Kaldor facts: Ideas, institutions, population, and human capital. American Economic Journal: Macroeconomics 2(1), 224245.Google Scholar
Judd, K. L. (1985) On the performance of patents. Econometrica 53(3), 567586.CrossRefGoogle Scholar
Kambourov, G. and Manovskii, I. (2009) Occupational specificity of human capital. International Economic Review 50(1), 63115.CrossRefGoogle Scholar
Klenow, P. J. (1996) Industry innovation: Where and why. Carnegie-Rochester Conference Series on Public Policy 44, 125150.CrossRefGoogle Scholar
Matutes, C., Regibeau, P. and Rockett, K. (1996) Optimal patent design and the diffusion of innovations. RAND Journal of Economics 27(1), 6083.CrossRefGoogle Scholar
Nordhaus, W. D. (1969) Invention Growth, and Welfare: A Theoretical Treatment of Technological Change. Cambridge, MA: MIT Press.Google Scholar
O’Donoghue, T. and Zweimüller, J. (2004) Patents in a model of endogenous growth. Journal of Economic Growth 9(1), 81123.CrossRefGoogle Scholar
O’Mahony, M. and Timmer, M. P. (2009) Output, input and productivity measures at the industry level: The EU KLEMS database. Economic Journal 119(538), F374F403.CrossRefGoogle Scholar
Papageorgiou, D. and Vourvachaki, E. (2017) Macroeconomic effects of structural reforms and fiscal consolidations: Trade-offs and complementarities. European Journal of Political Economy 48, 5473.CrossRefGoogle Scholar
Peretto, P. F. (1996) Sunk costs, market structure, and growth. International Economic Review 37(4), 895923.CrossRefGoogle Scholar
Peretto, P. F. (1998a) Technological change and population growth. Journal of Economic Growth 3(4), 283311.CrossRefGoogle Scholar
Peretto, P. F. (1998b) Technological change, market rivalry, and the evolution of the capitalist engine of growth. Journal of Economic Growth 3(1), 5380.CrossRefGoogle Scholar
Peretto, P. F. and Connolly, M. (2007) The Manhattan metaphor. Journal of Economic Growth 12(4), 329350.CrossRefGoogle Scholar
Romer, P. M. (1990) Endogenous technological change. Journal of Political Economy 98(5), 71102.CrossRefGoogle Scholar
Smulders, S. and van de Klundert, T. (1995) Imperfect competition, concentration and growth with firm-specific R&D. European Economic Review 39(1), 139160.CrossRefGoogle Scholar
Tamura, S., Sheehan, J., Martinez, C. and Kergroach, S. (2005) Promoting innovation in services. In: Enhancing the Performance of the Services Sector, pp. 133177. Paris: OECD.Google Scholar
van de Klundert, T. and Smulders, S. (1997) Growth, competition and welfare. Scandinavian Journal of Economics 99(1), 99118.CrossRefGoogle Scholar
van de Klundert, T. and Smulders, S. (1999) Catching-up and regulation in a two-sector small open economy. Review of International Economics 7(3), 431454.CrossRefGoogle Scholar
Vives, X. (2008) Innovation and competitive pressure. Journal of Industrial Economics 56(3), 419469.CrossRefGoogle Scholar
Yang, G. and K. E., Maskus (2001) Intellectual property rights, licensing, and innovation in an endogenous product-cycle model. Journal of International Economics 1(53), 169187.CrossRefGoogle Scholar
Supplementary material: PDF

Jerbashian supplementary material

Online Appendix

Download Jerbashian supplementary material(PDF)
PDF 354 KB