Effects of Patent Length on R&D: A Quantitative DGE Analysis

Chu, Angus C. (2009): Effects of Patent Length on R&D: A Quantitative DGE Analysis.

Abstract

This paper develops an R&D-growth model and calibrates the model to aggregate data of the US economy to quantify a structural relationship between patent length, R&D and consumption. Under parameter values that match the empirical flow-profit depreciation rate of patents and other key features of the US economy, extending the patent length beyond 20 years leads to a negligible increase in R&D despite equilibrium R&D underinvestment. In contrast, shortening the patent length leads to a significant reduction in R&D and consumption. Finally, this paper also analytically derives and quantifies a dynamic distortionary effect of patent length on capital investment.

• Item Type: MPRA Paper
• Language: English
• Keywords: innovation-driven growth; intellectual property rights; patent length; R&D
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O34 - Intellectual Property and Intellectual Capital; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives

References

Acemoglu D (2009) Introduction to modern economic growth. Princeton University Press.

Basu S, Fernald J (1997) Returns to scale in U.S. production: estimates and implications. Journal of Political Economy 105: 249-283.

Bessen J (2008) The value of U.S. patents by owner and patent characteristics. Research Policy 37: 932-945.

Chou CF, Shy O (1993) The crowding-out effects of long duration of patents. RAND Journal of Economics 24: 304-312.

Chu A (2009) Effects of blocking patents on R&D: a quantitative DGE analysis. Journal of Economic Growth 14: 55-78.

Comin D (2004) R&D: a small contribution to productivity growth. Journal of Economic Growth 9: 391-421.

Futagami K, Iwaisako T (2003) Patent policy in an endogenous growth model. Journal of Economics 78: 239-258.

Futagami K, Iwaisako T (2007) Dynamic analysis of patent policy in an endogenous growth model. Journal of Economic Theory 132: 306-334.

Gallini N (2002) The economics of patents: lessons from recent U.S. patent reform. Journal of Economic Perspectives 16: 131-154.

Jaffe A (2000) The U.S. patent system in transition: policy innovation and the innovation process. Research Policy 29: 531-557.

Jaffe A, Lerner J (2004) Innovation and its discontents: how our broken system is endangering innovation and progress, and what to do about it. Princeton University Press.

Jones C (1995a) Time series tests of endogenous growth models. Quarterly Journal of Economics 110: 495-525.

Jones C (1995b) R&D-based models of economic growth. Journal of Political Economy 103: 759-784.

Jones C (1999) Growth: with or without scale effects. American Economic Review 89: 139-144.

Jones C, Williams J (1998) Measuring the social return to R&D. Quarterly Journal of Economics 113: 1119-1135.

Jones C, Williams J (2000) Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5: 65-85.

Judd K (1985) On the performance of patents. Econometrica 53: 567-586.

Kwan YK, Lai E (2003) Intellectual property rights protection and endogenous economic growth. Journal of Economic Dynamics and Control 27: 853-873.

Laitner J (1982) Monopoly and long-run capital accumulation. Bell Journal of Economics 13: 143-157.

Laitner J, Stolyarov D (2004) Aggregate returns to scale and embodied technical change: theory and measurement using stock market data. Journal of Monetary Economics 51: 191-233.

Lanjouw J (1998) Patent protection in the shadow of infringement: simulation estimations of patent value. Review of Economic Studies 65: 671-710.

Nordhaus W (1969) Invention, growth, and welfare. The MIT Press.

O’Donoghue T, Zweimuller J (2004) Patents in a model of endogenous growth. Journal of Economic Growth 9: 81-123.

Pakes A (1986) Patents as options: some estimates of the value of holding European patent stocks. Econometrica 54: 755-784.

Rivera-Batiz L, Romer P (1991) Economic integration and endogenous growth. Quarterly Journal of Economics 106: 531-555.

Romer P (1990) Endogenous technological change. Journal of Political Economy 98: S71-S102.

Schankerman M, Pakes A (1986) Estimates of the value of patent rights in European countries during the post-1950 period. Economic Journal 96: 1052-1076.

Scotchmer S (2004) Innovation and incentives. The MIT Press.