The struggle between capitalists and workers concerning patent and monetary policies in a Schumpeterian economy

Abstract

This paper analyzes the conflict of interests between capitalists and workers concerning patent and monetary policy in a Schumpeterian growth model with cash-in-advance (CIA) constraints in the R&D sector, where capitalists own assets and workers supply labor. We find that (i) higher R&D productivity, lower CIA constraints, and a lower discount rate produce non-linear effects in the conflicts concerning the markup and the nominal interest rate, decreasing the former and increasing the latter in low-growth environments and having the opposite or no effects otherwise, (ii) the markup and the nominal interest rate have non-linear effects on the conflicts concerning the other similar to (i), (iii) considering less restrictive distributions of assets, labor supply, seigniorage revenues, monetary balances and financing of CIA constraints reduces, in general, the conflicts concerning the markup and interest rate. We conclude that policymakers will only be able to use patent and monetary policies to simultaneously promote economic growth and reduce the conflict of interest concerning the other if R&D productivity is sufficiently high. Otherwise, each policy can be used either to promote economic growth at the cost of exacerbating the conflicts of interest concerning the other or achieve the opposite effect.