Intellectual Property Rights and National R&D Subsidy Policies in a Two-Country Schumpeterian Framework

I present a two-country Schumpeterian growth model without scale effect, where both countries converge to parallel growth paths because of technological transfer. Two instruments are used by the lagging country to improve its position: R&D subsidies and improvement of patent protection. Because of additional effect on the labor market, the intellectual property protection tends to have more impact on country's relative position in the world's productivity rank than the direct subsidies to research.