| Abstract: |
This paper analyzes how changing the expected length of intellectual property
right (IPR) protection affects growth and the welfare of rich and poor
consumers. The analysis is based on a product-variety model with
non-homothetic preferences and endogenous markups in which, in accordance with
empirical evidence, rich households consume a larger variety of goods than
poorer ones. Unlike in models with homothetic preferences, the effect of
intellectual property (IP) protection on growth depends on the distribution of
income: when the length of IP protection is (uniformly) increased, growth
increases when there is inequality among households consuming IP protected
goods, but stays constant when there is no such inequality. When wealth is
unequally distributed, reducing the length of IP protection for new but not
for previously issued IPRs can increase growth. In the case where increasing
the length of IP protection increases growth, poor households prefer a shorter
length of protection than richer ones, although they consume fewer IP
protected goods. |