Essays on growth and innovation policies

This thesis consists of three chapters on innovation and economic growth. Chapter 1 is a joint work with Daron Acemoglu. We study the form of intellectual property rights (IPR) policy and licensing in the context of endogenous economic growth with step-by-step cumulative innovation. The main questions of the analysis are as follows. Should a company with a large technological lead receive the same IPR protection as a company with a more limited advantage? Should technological followers be able to license the products of technological leaders? We propose a general equilibrium framework to investigate these questions. IPR policy regulates whether followers in an industry can copy the technology of the leader and also how much they have to pay to license past innovations. We prove the existence of a steady-state equilibrium and characterize some of its properties. We then quantitatively investigate the implications of different types of IPR policy on the equilibrium growth rate and welfare. The two major results of this exercise are as follows. First, the growth rate and welfare in the standard models used in the (growth) literature can be improved significantly by introducing a simple form of licensing. Second and more importantly, full patent protection is not optimal from the viewpoint of maximizing welfare; instead, welfare-maximizing (and growth-maximizing) policy involves state-dependent IPR protection, providing greater protection to technological leaders that are further ahead than those that are close to their followers.