Welfare implication in a recent two-engine growth model

In recent years, the development of models that incorporate two growth engines as the basic growth framework has attracted increasing attention. The two engines are capital accumulation and research that expands product variety. This new framework has various important implications, including growth and environmental policies. In particular, if we limit the analysis to some stages of development, capital accumulation and environmental conditions are expected to have clearly contrasting impacts on economic welfare, making the assessment of household welfare a top analytical issue. The present paper performs a welfare analysis of the latest two-engine growth model, extending the scope of analysis beyond that presented in the original paper. Specifically, taking into account the actual situations in which policies are implemented, the new findings indicate that although there is no significant difference in the impact on economic welfare between R&D subsidies and the strengthening of patent protection, the latter, when implemented appropriately, may hold greater potential to improve welfare.