Intellectual Property and Product Market Competition Regulations in a Model with Two R&D Performing Sectors [WP]

Abstract

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 of the other sector. The overall impact of such policies on economic growth is ambiguous because of this. I perform a numerical exercise in an attempt of resolving the ambiguity. This exercise suggests that strengthening intellectual property rights can increase economic growth, but higher competition has a very limited effect on growth.