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

November 1, 2000

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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).

Subject: Economic sectors, Financial services, Human capital, Labor, Manufacturing, Real interest rates

Keywords: Cobb-Douglas production function, Competition Policy, government regulation, Growth, Human capital, Manufacturing, monopoly price distortion, production function, R&D, Real interest rates, Romer model, welfare analysis, welfare cost, welfare implication, welfare point of view, WP

Pages:
18
Volume:
2000
DOI:
https://doi.org/10.5089/9781451859607.001
Issue:
189
Series:
Working Paper No. 2000/189
Stock No:
WPIEA1892000
ISBN:
9781451859607
ISSN:
1018-5941

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