The growth and welfare analysis of patent and monetary policies in a Schumpeterian economy

This study compares the growth and welfare implications of patent policy and monetary policy in a Schumpeterian growth model where the market power of firms is subject to patent breadth whereas consumption and R&D investment are subject to cash-in-advance (CIA) constraints, respectively. The main findings are as follows. First, monetary policy is more effective than patent policy and the mix of these policies in terms of stimulating economic growth if initial patent protection in the economy is strong. Second, the welfare difference between patent policy and monetary policy is ambiguous, depending on the levels of predetermined instruments under these policies. However, these policy regimes are (weakly) dominated by their combination in terms of raising social welfare.