Patent Protection in a Model of Economic Growth in Multiple Regions

We study the effects of patent protection on economic growth in the ith region when this ith region is part of an aggregate economy of i=1,...,N regions. The regulatory authority in the ith region attempts to curtail the monopoly power of patent holding input producers by requiring them to charge a price that is parametrically related to the unconstrained monopoly price. Our analysis generates three results. First, we show the manner in which the equilibrium growth rate of the ith region is related to the above mentioned parameter. Second, we demonstrate the impact that changes in the stringency of patent protection have on the ith region's equilibrium growth rate. Finally, we explain why eliminating the monopoly distortion does not maximize social welfare in the ith region