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on Intellectual Property Rights |
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Issue of 2014‒08‒16
one paper chosen by Giovanni Ramello Università degli Studi del Piemonte Orientale “Amedeo Avogadro” |
| By: | Pedro Bento (West Virginia University, College of Business and Economics) |
| Abstract: | I introduce patents into a general equilibrium model of innovation, where innovators choose between creating a new product market and competing in an existing market. Patent holders demand royalties from sequential innovators, but are constrained by the ability of innovators to work around patents. I show patent protection acts as a net tax on sequential innovators, reducing both competition and productivity growth. Calibrated to match moments from U.S. data, the model predicts that eliminating patent protection in the U.S. would generate a 23% increase in steady-state productivity growth as well as an increase in welfare equivalent to that from a 16% increase in annual consumption. I test several implications of the model using both U.S. and cross-country data. Consistent with the model, the data suggests an increase in the strength of patent protection reduces both productivity growth and the average quality of innovations. |
| Keywords: | patent protection, competition, innovation, productivity, regulation, growth |
| JEL: | O1 O4 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:wvu:wpaper:13-13&r=ipr |