Patent Protection, Innovation-driven Growth, and Endogenous Growth Cycles: A Simple Macroeconomics Theory Framework

Based on Matsuyama (1999), we construct an endogenous growth model that includes innovation decisions, and discuss the impact of policies such as patent protection on corporate innovation incentives and innovation-driven development. We find that the impact of the intensity of patent protection policies on economic dynamics is nonlinear: when the patent protection policy is too weak, potential innovative firms have no incentive to innovate, and the economy cannot achieve the innovation-driven growth path; when the patent protection policy is too strong, the innovation speed and capital accumulation speed are difficult to match, resulting in an endogenous cycle between the factor-accumulation-driven interval and the innovation-driven interval. At the same time, we introduce population growth into the model and discuss the impact of declining population growth on the realization of innovation-driven growth. We find that under certain conditions, the decline in population growth will lead to an increase in innovation costs and a decrease in innovation speed, while the government can offset this effect by reasonably strengthening patent protection and subsidizing innovation.