Chu, Angus C. (2007): Economic Growth and Patent Policy: Quantifying the Effects of Patent Length on R&D and Consumption.
Download (266Kb) | Preview
Is the patent length an effective policy instrument in stimulating R&D? This paper develops a generalized variety-expanding growth model and then calibrates the model to the aggregate data of the US economy to analyze the effects of extending the patent length. The numerical exercise suggests that at the empirical range of patent-value depreciation rates, extending the patent length beyond 20 years leads to only a very small increase in R&D despite R&D underinvestment in the market economy. On the other hand, shortening the patent length can lead to a significant reduction in R&D and consumption. This paper also makes use of the dynamic general-equilibrium framework to examine the fraction of total factor productivity (TFP) growth that is driven by R&D, and the calibration exercise suggests that about 35% to 45% of the long-run TFP growth in the US is driven by R&D. Finally, this paper identifies and analytically derives a dynamic distortion of the patent length on saving and investment in physical capital that has been neglected by previous studies, which consequently underestimate the distortionary effects of patent protection.
|Item Type:||MPRA Paper|
|Institution:||University of Michigan|
|Original Title:||Economic Growth and Patent Policy: Quantifying the Effects of Patent Length on R&D and Consumption|
|Keywords:||endogenous growth; intellectual property rights; patent length; R&D|
|Subjects:||O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O34 - Intellectual Property Rights
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives
|Depositing User:||Angus C. Chu|
|Date Deposited:||29. Oct 2007|
|Last Modified:||13. Feb 2013 04:56|
1. Aghion, Phillippe; and Howitt, Peter (1992) “A Model of Growth through Creative Destruction” Econometrica vol. 60, p. 323-351. 2. Basu, Susanto; and Fernald, John G. (1997) “Returns to Scale in U.S. Production: Estimates and Implications” Journal of Political Economy vol. 105, p. 249-283. 3. Chu, Angus C. (2007) “A Generalized Quality-Ladder Growth Model with Overlapping Intellectual Property Rights: Quantifying the Effects of Blocking Patents on R&D” University of Michigan Working Paper. 4. Comin, Diego (2004) “R&D: A Small Contribution to Productivity Growth” Journal of Economic Growth vol. 9, p. 391-421. 5. Futagami, Koichi; and Iwaisako, Tatsuro (2003) “Patent Policy in an Endogenous Growth Model” Journal of Economics vol. 78, p. 239-258. 6. Gallini, Nancy T. (2002) “The Economics of Patents: Lessons from Recent U.S. Patent Reform” Journal of Economic Perspectives vol. 16, p. 131-154. 7. Gilbert, Richard; and Shapiro, Carl (1990) “Optimal Patent Length and Breadth” RAND Journal of Economics vol. 21, p. 106-112. 8. Goh, Ai-Ting; and Olivier, Jacques (2002) “Optimal Patent Protection in a Two-Sector Economy” International Economic Review vol. 43, p. 1191-1214. 9. Green, Jerry R.; and Scotchmer, Suzanne (1995) “On the Division of Profit in Sequential Innovation” RAND Journal of Economics vol. 26, p. 20-33. 10. Griliches, Zvi (1990) “Patent Statistics as Economic Indicators: A Survey” Journal of Economic Literature vol. 28, p. 1661-1707. 11. Grossman, Gene M.; and Helpman, Elhanan (1991) “Quality Ladders in the Theory of Growth” Review of Economic Studies vol. 58, p. 43-61. 12. Grossman, Gene M.; and Lai, Edwin L.-C. (2004) “International Protection of Intellectual Property” American Economic Review vol. 94 (5), p. 1635-1653. 13. Hunt, Robert M. (1999) “Nonobviousness and the Incentive to Innovate: An Economic Analysis of Intellectual Property Reform” Federal Reserve Bank of Philadelphia Working Paper 99-3. 14. Jaffe, Adam B. (2000) “The U.S. Patent System in Transition: Policy Innovation and the Innovation Process” Research Policy vol. 29, p. 531-557. 15. Jones, Charles I. (1995a) “Time Series Tests of Endogenous Growth Models” Quarterly Journal of Economics vol. 110, p. 495-525. 16. Jones, Charles I. (1995b) “R&D-Based Models of Economic Growth” Journal of Political Economy vol. 103, p. 759-784. 17. Jones, Charles I. (1999) “Growth: With or Without Scale Effects” American Economic Review Papers and Proceedings vol. 89 p. 139-144. 18. Jones, Charles I.; and Williams, John C. (1998) “Measuring the Social Return to R&D” Quarterly Journal of Economics vol. 113, p. 1119-1135. 19. Jones, Charles I.; and Williams, John C. (2000) “Too Much of a Good Thing? The Economics of Investment in R&D” Journal of Economic Growth, vol. 5, p. 65-85. 20. Judd, Kenneth L. (1985) “On the Performance of Patents” Econometrica vol. 53, p.567-586. 21. Klemperer, Paul (1990) “How Broad Should the Scope of Patent Protection Be? RAND Journal of Economics vol. 21, p. 113-130. 22. Kwan, Yum K.; and Lai, Edwin L.-C. (2003) “Intellectual Property Rights Protection and Endogenous Economic Growth” Journal of Economic Dynamics and Control vol. 27, p. 853-873. 23. Laitner, John (1982) “Monopoly and Long-Run Capital Accumulation” Bell Journal of Economics vol. 13, p. 143-157. 24. Laitner, John; and Stolyarov, Dmitriy (2004) “Aggregate Returns to Scale and Embodied Technical Change: Theory and Measurement Using Stock Market Data” Journal of Monetary Economics vol. 51, p. 191-233. 25. Laitner, John; and Stolyarov, Dmitriy (2005) “Owned Ideas and the Stock Market” University of Michigan Working Paper. 26. Lanjouw, Jean Olson (1998) “Patent Protection in the Shadow of Infringement: Simulation Estimations of Patent Value” Review of Economic Studies vol. 65, p. 671-710. 27. Li, Chol-Won (2001) “On the Policy Implications of Endogenous Technological Progress” Economic Journal vol. 111, p. 164-179. 28. Nordhaus, William (1969) “Invention, Growth, and Welfare” Cambridge, Mass.: MIT Press. 29. O’Donoghue, Ted (1998) “A Patentability Requirement for Sequential Innovation” RAND Journal of Economics vol. 29, p. 654-679. 30. O’Donoghue, Ted; Scotchmer, Suzanne; and Thisse, Jacques-Francois (1998) “Patent Breadth, Patent Life, and the Pace of Technological Progress” Journal of Economics and Management Strategy vol. 7, p. 1-32. 31. O’Donoghue, Ted; and Zweimuller, Josef (2004) “Patents in a Model of Endogenous Growth” Journal of Economic Growth vol. 9, p. 81-123. 32. Pakes, Ariel (1986) “Patents as Options: Some Estimates of the Value of Holding European Patent Stocks” Econometrica vol. 54, p. 755-784. 33. Pakes, Ariel; and Schankerman, Mark (1984) “The Rate of Obsolescence of Knowledge, Research Gestation Lags, and the Private Rate of Return to Research Resources” in Z. Griliches, eds., Patents, R&D and Productivity p. 73-88. 34. Rivera-Batiz, Luis A.; and Romer, Paul M. (1991) “Economic Integration and Endogenous Growth” Quarterly Journal of Economics vol. 106, p. 531-555. 35. Romer, Paul M. (1990) “Endogenous Technological Change” Journal of Political Economy vol. 98, S71-S102. 36. Schankerman, Mark; and Pakes, Ariel (1986) “Estimates of the Value of Patent Rights in European Countries during the Post-1950 Period” Economic Journal vol. 96, p. 1052-1076. 37. Scotchmer, Suzanne (2004) “Innovation and Incentives” Cambridge, Mass.: MIT Press. 38. Tandon, Pankaj (1982) “Optimal Patents with Compulsory Licensing” Journal of Political Economy vol. 90, p. 470-486.