Essays on Endogenous Growth and Innovation

This thesis consists of three essays on endogenous growth and innovation. Chapter 1 explores the interaction between productivity improvements and innovations by existing firms, and by more productive new firms. I develop a tractable endogenous growth model with capital accumulation in which growth is driven by innovation from incumbents and creative destruction by entrants. I demonstrate that capital accumulation, by affecting the level of incumbents’ and entrants’ R&D (which is an endogenous variable and the direct determinant of long-rung growth), plays an important role in stimulating economic growth. I also show the effect of policies on equilibrium productivity growth and provide a new perspective to the welfare analysis of models of innovation by both incumbents and entrants. Chapter 2 studies how strengthening patent protection influences economic growth in a Schumpeterian endogenous growth model with capital accumulation. In contrast to the previous literature, which mostly considered patent policy in infinite-lifetime economies, this paper investigates the implications of patent policy in an overlapping generations framework. That allows me to study how heterogeneity in patent ownership across generations changes the implications of patent length and breadth for R&D-based growth. The aim of Chapter 3 is to investigate interactive effects of intellectual property rights protection and monetary policy on economic growth. I develop an overlapping generations model with R&D-based growth in which IPR protection is introduced by considering patent breadth that determines firms' market power, while money demand is incorporated by imposing a cash-in-advance constraint on old age consumption expenditure. The demographic structure makes it possible to study inter-generational trade in patents and a life-cycle saving motive, thereby allowing the paper to contribute to the theory of optimal monetary and patent policy in a framework with R&D-based endogenous growth.