Gilad Sorek - Academia.edu (original) (raw)

Drafts by Gilad Sorek

Research paper thumbnail of Life‐Cycle Saving, Bequests, and the Role of Population in R&D‐based Growth

This study shows how the two alternative saving motives, life-cycle consumption smoothing and par... more This study shows how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the "weak scale-e¤ect". We take a textbook R&D-based growth model of in…nitely living agents with no weak-scale e¤ect, and analyze it in an Overlapping Generations framework -with and without bequest saving-motive. We show how the di¤erent saving motives determine the relation between population growth and per-capita income growth, which proves to be ambiguous in general, and may also be non-monotonic. Hence, we conclude that the counterfactual weak-scale e¤ect that is present in the second and third generations of R&D-based growth models of in…nitely-living agents depends on their speci…c demographic structure, and thus is not inherent to R&D-based growth theory itself. JEL Classi…cation: : O-31, O-40

Research paper thumbnail of Dynastic Altruism, Population Growth, and Economic Prosperity

We show that non-linear dynastic altruism toward future generations yields non-monotonic relation... more We show that non-linear dynastic altruism toward future generations yields non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to the recent line of modi…ed R&D-based growth models, aimed to align theory with empirical evidence on non-linear relation between population growth and economic prosperity. JEL Classi…cation: : O-31, O-40

Research paper thumbnail of Human‐Capital Spillover, Population, and Economic Growth

We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional... more We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional human capital spillover from parents to their o¤spring, which are subject to congestion in fertility rate, we establish non-monotonic relations between population growth and economic growth. These non-monotonic relations, which are polynomial in general, are determined by the base level of human capital spillover and the magnitude of the congestion e¤ect: a U shape relation can arise under low congestion factor, whereas a hump shape may present for high congestion factor JEL Classi…cation: : O-31, O-40

Papers by Gilad Sorek

Research paper thumbnail of Dynastic Altruism, Population Growth, and Economic Prosperity

We show that non-linear dynastic altruism toward future generations yields non-monotonic relation... more We show that non-linear dynastic altruism toward future generations yields non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to the recent line of modi…ed R&D-based growth models, aimed to align theory with empirical evidence on non-linear relation between population growth and economic prosperity.

Research paper thumbnail of Finite Lifetimes, Population, and Growth

This work highlights principle differences in the predictions of R&D-based growth theory derived ... more This work highlights principle differences in the predictions of R&D-based growth theory derived from the infinite horizon framework and the Overlapping Generations (OLG) framework of finitely living agents. In particular we show that the counterfactual positive effect of population growth on output growth presented in the second and third generation R&D-based growth models is eliminated in the corresponding OLG framework with finitely living agents. These differences arise because of the limiting effect of labor income on saving that presents only in the OLG framework. Our results indicate that the counterfactual relations between population and output growth rates presented in current R&D-based growth models are driven by their specific demographic structure.

Research paper thumbnail of Finite Lifetimes, Patents' Length and Breadth, and Growth

We study the implications of patents breadth and duration (length) to growth and welfare, in an o... more We study the implications of patents breadth and duration (length) to growth and welfare, in an overlapping generations economy of finitely living agents. This demographic structure gives room to inter-generational trade in old patents and life-cycle saving motive, which prove to be relevant to the implications of different patent-policy dimensions. Patent breadth protection affects life-cycle saving and thereby aggregate investment, and the allocation investment between patents and physical capital. Patents duration affects also the stock of, and trade in, old patents. We show that, these unique characteristics of the OLG economy provide a case for incomplete patent breadth protection and finite patent duration, which are both growth and welfare enhancing. Furthermore, we show that the implications of patent policy to growth depend on whether the differentiated inputs are intermediate goods or investment goods. Our results contrast with the ones derived in previous studies that emp...

Research paper thumbnail of Income Risk, Medical Insurance Take Up, and Consumer Bankruptcy

Research paper thumbnail of Life‐Cycle Saving, Bequests, and the Role of Population in R&D‐based Growth

This study shows how the two alternative saving motives, life-cycle consumption smoothing and par... more This study shows how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the "weak scale-e¤ect". We take a textbook R&D-based growth model of in…nitely living agents with no weak-scale e¤ect, and analyze it in an Overlapping Generations framework-with and without bequest saving-motive. We show how the di¤erent saving motives determine the relation between population growth and per-capita income growth, which proves to be ambiguous in general, and may also be non-monotonic. Hence, we conclude that the counterfactual weak-scale e¤ect that is present in the second and third generations of R&D-based growth models of in…nitely-living agents depends on their speci…c demographic structure, and thus is not inherent to R&D-based growth theory itself.

Research paper thumbnail of Economic Development and Stage Dependent IPR

We study growth-maximizing Intellectual Property Rights (IPR) policy for developing economy in a ... more We study growth-maximizing Intellectual Property Rights (IPR) policy for developing economy in a close Overlapping-Generations model. We …rst show that R&D-based growth in such economy is subject to threshold externalities and transitional dynamics. Then we show that the IPR policy that maximizes output growth rates is stage-dependent: in early phases of development weak IPR protection may be necessary to sustain and to fasten economic growth. This is because weaker IPR protection shifts income from the old to the young generation and thereby enhancing saving and investment, which otherwise are insu¢ cient to initiate growth. However as the economy develops and growth sustains optimal IPR protection tightens.

Research paper thumbnail of Finite Lifetimes, Patentsʹ Length and Breadth, and Growth

Research paper thumbnail of Human‐Capital Spillover, Population, and Economic Growth

We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional... more We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional human capital spillover from parents to their o¤spring, which are subject to congestion in fertility rate, we establish non-monotonic relations between population growth and economic growth. These non-monotonic relations, which are polynomial in general, are determined by the base level of human capital spillover and the magnitude of the congestion e¤ect: a U shape relation can arise under low congestion factor, whereas a hump shape may present for high congestion factor

Research paper thumbnail of Dynastic Altruism, Population, and R&D based Growth

Economics Bulletin, 2016

We show that non-linear dynastic altruism toward future generations yields a non-monotonic relati... more We show that non-linear dynastic altruism toward future generations yields a non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to a recent line of modified R&D-based growth models aimed at aligning theory with empirical evidence on the non-linear relation between population growth and economic prosperity.

Research paper thumbnail of Health Insurance and Competition in Markets for Differentiated Medical Products

I study duopolistic market for differentiated medical products. Medical providers decide whether ... more I study duopolistic market for differentiated medical products. Medical providers decide whether to sell on the spot market to sick consumers or to sell through competitive insurance market to healthy consumers. While shopping for insurance consumers know only the distribution of possible medical needs they may have if they get sick. Only when getting sick their actual medical need reveals and diagnosed. Hence consumers on the insurance market have lower taste differentiation than the sick consumers who are shopping on the spot market. I find that in equilibrium providers sell only on the insurance market, even though this intensifies competition because of lower taste differentiation. Competition between providers under insurance sales brings premiums low enough to motivate consumers buying insurance for both products. Insurance sales generate effi cient horizontal product differentiation, lower prices, and effi ciently higher quality. JEL Classification: : I11, I13, L1 Key-words: ...

Research paper thumbnail of Background Risk and Insurance Take-up under Limited Liability

We study the effect of a non-insurable background risk (BGR) on insurance take-up choices over in... more We study the effect of a non-insurable background risk (BGR) on insurance take-up choices over insurable risks made by risk-averse agents under limited liability laws. This economic environment applies, for example, to the consumer’s decision to purchase medical insurance in the face of non-insurable income risk under limited liability provided by bankruptcy. We consider two types of BGR - a wealth deteriorating risk and a mean-preserving risk. We show that the magnitude of both BGR types has a non-monotonic effect on the rate of uninsured consumers. This is in contrast with the standard monotonic effect of background risk on the demand for insurance, obtained for risk-averse agents under full liability.

Research paper thumbnail of Efficient Self-Protection and Progress in Curing-Technology

The direct medical costs associated with obesity, smoking, and other non-healthy habits are estim... more The direct medical costs associated with obesity, smoking, and other non-healthy habits are estimated to account for more than 20% of U.S. health spending. Hence, poor health choices induce significant aggregate shift in spending away from treating competing?non preventable?medical risks and from nonmedical consumption. Such a shift in spending distorts relative incentives to innovate in different sectors, through market-size effect. As consumers fail to internalize these aggregate-level externalities, private-prevention is generally inefficient. We show that private prevention is insufficient compared with social optimum, unless technological opportunities to develop cures for preventable diseases are sufficiently superior. Furthermore, under multiple preventable-risks, prevention efforts are biased in favor of the risk with higher potential for curing advances.

Research paper thumbnail of Patents and quality growth in OLG economy

Journal of Macroeconomics, 2011

This paper shows how heterogeneity in patent ownership across generations and lifecycle saving co... more This paper shows how heterogeneity in patent ownership across generations and lifecycle saving considerations qualitatively change the conventional implications of patent policy for quality growth. We study a close Overlapping Generations economy that grows through sequential quality improvements (“quality-ladder”), to show that for plausible values of the Inter-temporal Elasticity of Substitution (a) shorter patent length enhances growth (b) under exogenous innovation size loosening patent breadth protection spurs R&D investment and quality growth and (c) the effect of loosening lagging breadth protection on R&D investment and quality growth under endogenous innovation size depends on patents length. Our findings explore a new channel through which strong patents may hinder innovation and emphasize the importance of coordination in patent-policy across the different dimensions of the patents system.

Research paper thumbnail of Price Controls for Medical Innovations in a Life Cycle Perspective

Health Economics, 2013

We study the market for new medical technologies from a life cycle perspective, incorporating the... more We study the market for new medical technologies from a life cycle perspective, incorporating the fact that healthcare utilization is biased towards old age. Contrary to conventional wisdom, we find that price controls on medical innovations can expand investment in medical R&D and results in Pareto superior social outcomes, a consequence of the price controls' ability to increase saving. Importantly, this finding occurs only when the price cap regime is extensive: selective regulation on few technologiessuch as pharmaceuticals alonehave the conventional negative effect on innovation.

Research paper thumbnail of Free licensing to boost aggregate odds for success

Economics Letters, 2012

We show how technological leader gains from inviting entrant into R&D competition to improve over... more We show how technological leader gains from inviting entrant into R&D competition to improve over existing patented technology, as the entrant takes complementary R&D effort and demand for both current and improved technologies is increasing with aggregate probability for successful quality improvement.

Research paper thumbnail of Medical Technology Ageing and Growth

... Israel January 2008 † The study was performed under the most supportive supervision of Prof.D... more ... Israel January 2008 † The study was performed under the most supportive supervision of Prof.Daniel Tsiddon. ... per capita income due to the industrial revolution (Fogel, 1993). The next twenty-year gain in life expectancy was achieved in the first half of the twentieth century as ...

Research paper thumbnail of Optimal Patent Breadth for OLG Economy

econ.haifa.ac.il

1 Optimal Patent Breadth for OLG Economy Gilad Sorek ... weaker lagging breadth protection in thi... more 1 Optimal Patent Breadth for OLG Economy Gilad Sorek ... weaker lagging breadth protection in this set up, conventionally hinders innovation and 1 Jaffe (1999) comprehensively surveys the research on patents and patent policy design, and American patent policy in practice. ...

Research paper thumbnail of Life‐Cycle Saving, Bequests, and the Role of Population in R&D‐based Growth

This study shows how the two alternative saving motives, life-cycle consumption smoothing and par... more This study shows how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the "weak scale-e¤ect". We take a textbook R&D-based growth model of in…nitely living agents with no weak-scale e¤ect, and analyze it in an Overlapping Generations framework -with and without bequest saving-motive. We show how the di¤erent saving motives determine the relation between population growth and per-capita income growth, which proves to be ambiguous in general, and may also be non-monotonic. Hence, we conclude that the counterfactual weak-scale e¤ect that is present in the second and third generations of R&D-based growth models of in…nitely-living agents depends on their speci…c demographic structure, and thus is not inherent to R&D-based growth theory itself. JEL Classi…cation: : O-31, O-40

Research paper thumbnail of Dynastic Altruism, Population Growth, and Economic Prosperity

We show that non-linear dynastic altruism toward future generations yields non-monotonic relation... more We show that non-linear dynastic altruism toward future generations yields non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to the recent line of modi…ed R&D-based growth models, aimed to align theory with empirical evidence on non-linear relation between population growth and economic prosperity. JEL Classi…cation: : O-31, O-40

Research paper thumbnail of Human‐Capital Spillover, Population, and Economic Growth

We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional... more We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional human capital spillover from parents to their o¤spring, which are subject to congestion in fertility rate, we establish non-monotonic relations between population growth and economic growth. These non-monotonic relations, which are polynomial in general, are determined by the base level of human capital spillover and the magnitude of the congestion e¤ect: a U shape relation can arise under low congestion factor, whereas a hump shape may present for high congestion factor JEL Classi…cation: : O-31, O-40

Research paper thumbnail of Dynastic Altruism, Population Growth, and Economic Prosperity

We show that non-linear dynastic altruism toward future generations yields non-monotonic relation... more We show that non-linear dynastic altruism toward future generations yields non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to the recent line of modi…ed R&D-based growth models, aimed to align theory with empirical evidence on non-linear relation between population growth and economic prosperity.

Research paper thumbnail of Finite Lifetimes, Population, and Growth

This work highlights principle differences in the predictions of R&D-based growth theory derived ... more This work highlights principle differences in the predictions of R&D-based growth theory derived from the infinite horizon framework and the Overlapping Generations (OLG) framework of finitely living agents. In particular we show that the counterfactual positive effect of population growth on output growth presented in the second and third generation R&D-based growth models is eliminated in the corresponding OLG framework with finitely living agents. These differences arise because of the limiting effect of labor income on saving that presents only in the OLG framework. Our results indicate that the counterfactual relations between population and output growth rates presented in current R&D-based growth models are driven by their specific demographic structure.

Research paper thumbnail of Finite Lifetimes, Patents' Length and Breadth, and Growth

We study the implications of patents breadth and duration (length) to growth and welfare, in an o... more We study the implications of patents breadth and duration (length) to growth and welfare, in an overlapping generations economy of finitely living agents. This demographic structure gives room to inter-generational trade in old patents and life-cycle saving motive, which prove to be relevant to the implications of different patent-policy dimensions. Patent breadth protection affects life-cycle saving and thereby aggregate investment, and the allocation investment between patents and physical capital. Patents duration affects also the stock of, and trade in, old patents. We show that, these unique characteristics of the OLG economy provide a case for incomplete patent breadth protection and finite patent duration, which are both growth and welfare enhancing. Furthermore, we show that the implications of patent policy to growth depend on whether the differentiated inputs are intermediate goods or investment goods. Our results contrast with the ones derived in previous studies that emp...

Research paper thumbnail of Income Risk, Medical Insurance Take Up, and Consumer Bankruptcy

Research paper thumbnail of Life‐Cycle Saving, Bequests, and the Role of Population in R&D‐based Growth

This study shows how the two alternative saving motives, life-cycle consumption smoothing and par... more This study shows how the two alternative saving motives, life-cycle consumption smoothing and parental bequests, determine the relation between population growth and R&D-based economic growth, i.e. the sign of the "weak scale-e¤ect". We take a textbook R&D-based growth model of in…nitely living agents with no weak-scale e¤ect, and analyze it in an Overlapping Generations framework-with and without bequest saving-motive. We show how the di¤erent saving motives determine the relation between population growth and per-capita income growth, which proves to be ambiguous in general, and may also be non-monotonic. Hence, we conclude that the counterfactual weak-scale e¤ect that is present in the second and third generations of R&D-based growth models of in…nitely-living agents depends on their speci…c demographic structure, and thus is not inherent to R&D-based growth theory itself.

Research paper thumbnail of Economic Development and Stage Dependent IPR

We study growth-maximizing Intellectual Property Rights (IPR) policy for developing economy in a ... more We study growth-maximizing Intellectual Property Rights (IPR) policy for developing economy in a close Overlapping-Generations model. We …rst show that R&D-based growth in such economy is subject to threshold externalities and transitional dynamics. Then we show that the IPR policy that maximizes output growth rates is stage-dependent: in early phases of development weak IPR protection may be necessary to sustain and to fasten economic growth. This is because weaker IPR protection shifts income from the old to the young generation and thereby enhancing saving and investment, which otherwise are insu¢ cient to initiate growth. However as the economy develops and growth sustains optimal IPR protection tightens.

Research paper thumbnail of Finite Lifetimes, Patentsʹ Length and Breadth, and Growth

Research paper thumbnail of Human‐Capital Spillover, Population, and Economic Growth

We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional... more We study two-sector R&D model with endogenous human capital accumulation. Allowing for fractional human capital spillover from parents to their o¤spring, which are subject to congestion in fertility rate, we establish non-monotonic relations between population growth and economic growth. These non-monotonic relations, which are polynomial in general, are determined by the base level of human capital spillover and the magnitude of the congestion e¤ect: a U shape relation can arise under low congestion factor, whereas a hump shape may present for high congestion factor

Research paper thumbnail of Dynastic Altruism, Population, and R&D based Growth

Economics Bulletin, 2016

We show that non-linear dynastic altruism toward future generations yields a non-monotonic relati... more We show that non-linear dynastic altruism toward future generations yields a non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to a recent line of modified R&D-based growth models aimed at aligning theory with empirical evidence on the non-linear relation between population growth and economic prosperity.

Research paper thumbnail of Health Insurance and Competition in Markets for Differentiated Medical Products

I study duopolistic market for differentiated medical products. Medical providers decide whether ... more I study duopolistic market for differentiated medical products. Medical providers decide whether to sell on the spot market to sick consumers or to sell through competitive insurance market to healthy consumers. While shopping for insurance consumers know only the distribution of possible medical needs they may have if they get sick. Only when getting sick their actual medical need reveals and diagnosed. Hence consumers on the insurance market have lower taste differentiation than the sick consumers who are shopping on the spot market. I find that in equilibrium providers sell only on the insurance market, even though this intensifies competition because of lower taste differentiation. Competition between providers under insurance sales brings premiums low enough to motivate consumers buying insurance for both products. Insurance sales generate effi cient horizontal product differentiation, lower prices, and effi ciently higher quality. JEL Classification: : I11, I13, L1 Key-words: ...

Research paper thumbnail of Background Risk and Insurance Take-up under Limited Liability

We study the effect of a non-insurable background risk (BGR) on insurance take-up choices over in... more We study the effect of a non-insurable background risk (BGR) on insurance take-up choices over insurable risks made by risk-averse agents under limited liability laws. This economic environment applies, for example, to the consumer’s decision to purchase medical insurance in the face of non-insurable income risk under limited liability provided by bankruptcy. We consider two types of BGR - a wealth deteriorating risk and a mean-preserving risk. We show that the magnitude of both BGR types has a non-monotonic effect on the rate of uninsured consumers. This is in contrast with the standard monotonic effect of background risk on the demand for insurance, obtained for risk-averse agents under full liability.

Research paper thumbnail of Efficient Self-Protection and Progress in Curing-Technology

The direct medical costs associated with obesity, smoking, and other non-healthy habits are estim... more The direct medical costs associated with obesity, smoking, and other non-healthy habits are estimated to account for more than 20% of U.S. health spending. Hence, poor health choices induce significant aggregate shift in spending away from treating competing?non preventable?medical risks and from nonmedical consumption. Such a shift in spending distorts relative incentives to innovate in different sectors, through market-size effect. As consumers fail to internalize these aggregate-level externalities, private-prevention is generally inefficient. We show that private prevention is insufficient compared with social optimum, unless technological opportunities to develop cures for preventable diseases are sufficiently superior. Furthermore, under multiple preventable-risks, prevention efforts are biased in favor of the risk with higher potential for curing advances.

Research paper thumbnail of Patents and quality growth in OLG economy

Journal of Macroeconomics, 2011

This paper shows how heterogeneity in patent ownership across generations and lifecycle saving co... more This paper shows how heterogeneity in patent ownership across generations and lifecycle saving considerations qualitatively change the conventional implications of patent policy for quality growth. We study a close Overlapping Generations economy that grows through sequential quality improvements (“quality-ladder”), to show that for plausible values of the Inter-temporal Elasticity of Substitution (a) shorter patent length enhances growth (b) under exogenous innovation size loosening patent breadth protection spurs R&D investment and quality growth and (c) the effect of loosening lagging breadth protection on R&D investment and quality growth under endogenous innovation size depends on patents length. Our findings explore a new channel through which strong patents may hinder innovation and emphasize the importance of coordination in patent-policy across the different dimensions of the patents system.

Research paper thumbnail of Price Controls for Medical Innovations in a Life Cycle Perspective

Health Economics, 2013

We study the market for new medical technologies from a life cycle perspective, incorporating the... more We study the market for new medical technologies from a life cycle perspective, incorporating the fact that healthcare utilization is biased towards old age. Contrary to conventional wisdom, we find that price controls on medical innovations can expand investment in medical R&D and results in Pareto superior social outcomes, a consequence of the price controls' ability to increase saving. Importantly, this finding occurs only when the price cap regime is extensive: selective regulation on few technologiessuch as pharmaceuticals alonehave the conventional negative effect on innovation.

Research paper thumbnail of Free licensing to boost aggregate odds for success

Economics Letters, 2012

We show how technological leader gains from inviting entrant into R&D competition to improve over... more We show how technological leader gains from inviting entrant into R&D competition to improve over existing patented technology, as the entrant takes complementary R&D effort and demand for both current and improved technologies is increasing with aggregate probability for successful quality improvement.

Research paper thumbnail of Medical Technology Ageing and Growth

... Israel January 2008 † The study was performed under the most supportive supervision of Prof.D... more ... Israel January 2008 † The study was performed under the most supportive supervision of Prof.Daniel Tsiddon. ... per capita income due to the industrial revolution (Fogel, 1993). The next twenty-year gain in life expectancy was achieved in the first half of the twentieth century as ...

Research paper thumbnail of Optimal Patent Breadth for OLG Economy

econ.haifa.ac.il

1 Optimal Patent Breadth for OLG Economy Gilad Sorek ... weaker lagging breadth protection in thi... more 1 Optimal Patent Breadth for OLG Economy Gilad Sorek ... weaker lagging breadth protection in this set up, conventionally hinders innovation and 1 Jaffe (1999) comprehensively surveys the research on patents and patent policy design, and American patent policy in practice. ...

Research paper thumbnail of Optimal Industrial Policies in a Two-Sector-R Economy

The B.E. Journal of Macroeconomics, 2020

This study characterizes welfare-enhancing industrial policies in a two-sector-R&D economy that i... more This study characterizes welfare-enhancing industrial policies in a two-sector-R&D economy that incorporates both vertical and horizontal innovation. It elaborates on current welfare analyses of two-sector-R&D economies along two lines. First, it explores the welfare properties of non-drastic innovations whereas current analyses are confined to drastic innovations. It is shown that while the endogenously chosen size of drastic innovations is insufficient compared to social optimum, the size of non-drastic innovations may be excessive compared with the welfare maximizing one. Second, it explores welfare-enhancing policies designed to restrict innovators’ market power, whereas current policy analyses focus on R&D and market-entry subsidies. The welfare-maximizing policies presented here combine proper limitations on innovators’ market power along with a corresponding production tax (or subsidy). The limitations over innovators’ market power are aimed to support the optimal innovation ...

Research paper thumbnail of Dynamics of Human Capital Accumulation, IPR Policy, and Growth

We study the effect of IPR (Intellectual Property Rights) policy on growth, in a closed overlappi... more We study the effect of IPR (Intellectual Property Rights) policy on growth, in a closed overlapping-generations economy, which undergoes transitional development phase of human capital accumulation. We show that the growth-maximizing policy is stage-dependent: in the early development phase, during which innovation cost is high relative to worker productivity, weak IPR protection can expedite economic growth and may be necessary to escape long run stagnation. Weaker IPR protection erodes monopolistic deadweight loss and, thereby, increases aggregate output and saving. However, it also shifts investment away from R&D activity towards the formation of physical capital. We show that the former (positive) effect is dominant during the early development phase. However, as human capital is further accumulated, and labor productivity correspondingly increases, economic growth is maximized with stronger IPR protection.

Research paper thumbnail of Location and Product Choice in Option Demand Markets

Consumers' uncertainty regarding their future needs generates demand for options to utilize d... more Consumers' uncertainty regarding their future needs generates demand for options to utilize different products. Such options are commonly sold in the form of insurance. A prime example for option demand presents in health care markets and other repair markets. This work studies two-dimensional spatial competition between medical providers who choose their geographical location and medical-care specialization (i.e. product differentiation). Consumers know their geographical address but do not know their preferred medical treatment before getting sick. Providers make location and product choices and then compete by selling options to utilize their services (i.e. health insurance). I characterize two types of equilibria: one with Min-Min differentiation that is complete assimilation and the other with Min-Intermediate differentiation, in which both providers locate at the city center and product differentiation is efficient. In the first equilibrium each consumer buys insurance for...