R&D and Production Behavior of Asymmetric Duopoly Subject to Knowledge Spillovers

We construct an asymmetri c duopolistic R&D and production behavior model subject to knowledge spillovers. This model is an extension to the symmetric model of d'Aspremont and Jacquemin (A&J (1988)) and aims to determine the cooperative and non-cooperative R&D strategies for two agents of different size. The paper concludes that the introduction of asymmetry into the A&J (1988) model leads to different R&D expenditures and production decisions made by the firms. Simulations show that the bigger agent has larger R&D expenditures and higher output. If firms choose the monopoly collusion or the welfare-maximizing strategy, the optimal solution implies that R&D is conducted asymmetrically by both agents, but that production is conducted only by the largest agent

Measuring Knowledge Spillovers Using Belgian EPO and USPTO Patent Data

This paper investigates two major issues of the patenting behavior of Belgian firms. Firstly, it studies the probabilistic distribution of the patent citations among several major sectors. Secondly, the firm-oriented data is studied to investigate the relationships between the Belgian firms’ size and their patent citation behavior. The modeling results conclude that there is evidence that the smaller firms tend to be more active in patent citation than larger ones. Analyzing the implications from the probabilistic models of citations the paper concludes, that there are different patterns of citation behavior in different sectors. Some sectors exhibit more openness toward inter-firm or inter-industry spillovers, while others do not. Moreover, different industrial sectors exhibit different relationships between the probability of a citation to occur in this sector and the relative time lag between the citing and cited patents.

The Patterns of Inter-firm and Inter-industry Knowledge Flows in the Netherlands

This paper presents a study of backward and forward patent citations in patents granted to firms and institutions in the Netherlands by the United States Patent and Trademark Office (USPTO). The study establishes different patterns of patent citation in recent Dutch patents belonging to different industrial classes. We run our model in the set of backward citations made in Dutch applicants’ patents during 1996-2006 and in the set of forward citations to patents issued to firms and organizations in the Netherlands during 1993-2006. We compare the patterns of knowledge utilization (represented by backward patent citations) and knowledge dissemination (represented by forward patent citations) and obtain evidence of inter- or intra-firm and inter- or intra-industry knowledge spillovers. In the context of effective competition and innovation policies we advocate for paying special attention to industry specifics when designing policy programs and measures directed at stimulating R&D cooperation and knowledge spillovers. We present evidence that policies for promoting better knowledge exchange among firms should also distinguish between the measures for promoting the inward and the outward knowledge flows for companies in the Netherlands.knowledge flows, R&D spillovers, backward and forward patent citations

Simulation, estimation and welfare implications of monetary policies in a 3-country NOEM model

In this paper we derive a microfounded macro New Keynesian model for open economies, be them large or small. We consider habit formation in consumption, sectoral linkages, domestic and foreign governments, tradable and non-tradable final and intermediate goods and imperfect pass-through in these sectors. Sticky nominal prices and wages are modeled in a Calvo way. The model economy is composed of a continuum of infinitely-lived consumers and producers for three regions (countries). Numerical simulations and econometric estimations are presented with a focus on a small open economy member of the EMU. Welfare implications of the involved price and wage rigidities are discussedNew Keynesian open economy model, tradable and non-tradable sectors, final and intermediate goods, monetary policy rules, numerical simulations, Bayesian estimation, welfare implications

A Microfounded Sectoral Model for Open Economies

In this paper we derive a microfounded macro New Keynesian model for open economies, be them large or small. We consider habit formation in consumption, sectoral linkages for tradable and non-tradable goods, capital stock investments with variable capital utilization, domestic and foreign governments, imperfect (exchange rate) pass-through in import prices and incomplete international financial markets. Sticky nominal prices and wages are modeled in Calvo and Taylor staggered ways. The model economy is composed of a continuum of infinitely-lived consumers and producers of final and intermediate goods. We provide a very general log-linearization method, from which we can easily obtain various special cases, as trend inflation or steady-state log-linearizations.Numerical simulations of the two-country sectoral model are provided for a relatively large number of structural shocks as domestic and foreign productivity shocks in final tradables and non-tradables, money demand shocks and a shock in the exchange rate. Such a model is well suited for monetary policy analysis at the international level and risk analysis.New Keynesian open economy model, tradable and non-tradable sectors, final and intermediate goods, log-linearization

Strategic Interactions between Fiscal and Monetary Authorities in a Multi-Country New-Keynesian Model of a Monetary Union

In this paper we consider a number of key issues related to the policy coordination in a monetary union that has been recently discussed in the literature. To this end we propose a multi-country New-Keynesian model of a monetary union cast in the framework of linear quadratic differential games. Our framework can be used to simulate strategic interactions between an arbitrary number of fiscal authorities interacting in coalitions with or against the common central bank. For many parameter combinations our results confirm the findings of Beetsma et al. (2001) that for symmetric inflation and output gap shocks, fiscal coordination between all the countries is counter-productive within a monetary union. The clash between the central bank and the coalition of national governments is most intense under a symmetric inflation shocks when there is strong conflict concerning the orientation of stabilisation policies. This conflict is less pronounced under an asymmetric inflation and output gap shocks, however, still makes fiscal cooperation unattractive. We extend the existing New-Keynesian literature on policy coordination by considering not only cases of non-coordination, fiscal cooperation and the grand coalition, but also the partial cooperation arrangements between fiscal players. We show that, in many cases, partial fiscal coordination of a subgroup of fiscal players is more efficient, from the social point of view, than non-coordination. However, this regime still delivers poor results from the perspective of individual players. This occurs especially in the case of asymmetric shocks, as the countries directly affected by the shocks tend to "export" losses to the countries with whom they form a coalition. Furthermore, we show that the common objective of the grand coalition is of the upmost importance for the outcome of the stabilisation process.macroeconomic stabilisation, EMU, policy coordination, linear quadratic differential games

R&D and Production Behavior of Asymmetric Duopoly Subject to Knowledge Spillovers

We construct an asymmetri c duopolistic R&D and production behavior model subject to knowledge spillovers. This model is an extension to the symmetric model of d'Aspremont and Jacquemin (A&J (1988)) and aims to determine the cooperative and non-cooperative R&D strategies for two agents of different size. The paper concludes that the introduction of asymmetry into the A&J (1988) model leads to different R&D expenditures and production decisions made by the firms. Simulations show that the bigger agent has larger R&D expenditures and higher output. If firms choose the monopoly collusion or the welfare-maximizing strategy, the optimal solution implies that R&D is conducted asymmetrically by both agents, but that production is conducted only by the largest agent.Innovation, R&D, spillovers, cooperation

Innovation Strategies in a Competitive Dynamic Setting

This paper presents a dynamic model of a competitive R&D and production duopoly subject to knowledge spillovers. Two asymmetric firms operate for a limited period of time and dispose their knowledge capital in the end. Both firms and the social planner prefer the R&D-cooperative strategy over the competitive one regardless of the intensity of knowledge spillovers. Accumulation of knowledge capital results allows the monopolist to have lower marginal cost of production and charge a lower market price than a fully competitive duopoly. Being able to define the degree of knowledge exchange when creating a research joint venture, the firms do not necessary choose the highest degree of cooperation available.innovation, R&D, spillovers, cooperation

Staying Together or Breaking Apart: Policy-Makers’ Endogenous Coalitions Formation in the European Economic and Monetary Union

In this paper, we analyze coordination of macroeconomic stabilization policies within the EMU by focusing, in a dynamic set-up, on asymmetries, externalities, and the existence of a multi-country context. We study how coalitions among fiscal and monetary authorities are formed and what are their effects on the stabilization of output and price. In particular, our attention is directed to study the consequences on these issues of different institutional contexts in which policy-makers may act. Among other results, we found that, in the presence of externalities, the occurrence of asymmetries is a necessary but not a sufficient condition for cooperation.Macroeconomic stabilization, EMU, coalition formation