To "B" or Not to "B": A Welfare Analysis of Breaking Up Monopolies in an Endogenous Growth Model

Author: Danyang Xie

This paper studies the welfare consequences of a government regulation that forces a patented equipment to be supplied by a number of independent producers. On the one hand, such a regulation hurts the value of a patent and therefore reduces activities in the R&D sector. On the other hand, the enhanced competition for the equipment improves efficiency in the manufacturing sector. Should monopolies protected by intellectual property rights be broken up? The answer is "no" in a Romer-type growth model, but there is sufficient reason to believe that the answer could be "yes" in a model advocated by Jones (1995).

Volume/Issue: Volume 2000 Issue 189

Publication date: November 2000

ISBN: 9781451859607

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Business and Economics , Banks and Banking , Labor , Industries - Manufacturing , WP , production function , R&D , Growth , Competition Policy , welfare analysis , Cobb-Douglas production function , Romer model , government regulation , monopoly price distortion , welfare point of view , welfare cost , welfare implication , Human capital , Manufacturing , Real interest rates

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Summary

This paper studies the welfare consequences of a government regulation that forces a patented equipment to be supplied by a number of independent producers. On the one hand, such a regulation hurts the value of a patent and therefore reduces activities in the R&D sector. On the other hand, the enhanced competition for the equipment improves efficiency in the manufacturing sector. Should monopolies protected by intellectual property rights be broken up? The answer is “no” in a Romer-type growth model, but there is sufficient reason to believe that the answer could be “yes” in a model advocated by Jones (1995).