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

To "B" or Not to "B" : A Welfare Analysis of Breaking Up Monopolies in an Endogenous Growth Model
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Volume/Issue:
2000/189
Series:
IMF Working Papers
Author(s):
Danyang Xie
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
November 2000
DOI:
http://dx.doi.org/10.5089/9781451859607.001
ISBN:
9781451859607
ISSN:
1018-5941
Page:
18
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).
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