Examination and Approval of New Patents in an Endogenous Growth Model

This study introduces the examination duration for newly developed goods into a standard R&D-based growth model. Producing such goods requires approval from an authority, and their examination incurs both cost and time. Thus, there is a lag between invention and production. This study investigates the effects of reducing the examination duration on examination backlogs (the number of newly invented goods under examination), economic growth, and welfare. We obtain an inverted-U shaped relationship between backlogs and duration, because reducing the duration decreases backlogs by accelerating the examination process, but simultaneously increases backlogs by promoting R&D and increasing the number of applications. In addition, we demonstrate that reducing the examination duration promotes economic growth. However, a rather short examination duration needs considerable resources as the examination has a higher cost. Thus, an extremely short duration hurts welfare. Our numerical analysis reveals the existence of an optimal examination duration.