A Generalized Quality-Ladder Growth Model with Patent Breadth: Quantifying the Effects of Blocking Patents on R&D

Chu, Angus C. (2007): A Generalized Quality-Ladder Growth Model with Patent Breadth: Quantifying the Effects of Blocking Patents on R&D.

Abstract

Why is there so little R&D in the US? To quantify the effects of blocking patents on R&D, this paper firstly develops a tractable framework to model the transition dynamics of an economy with patent breadth and blocking patents in a generalized quality-ladder growth model. In this dynamic general-equilibrium setting, a dynamic distortion on capital accumulation that has been neglected by previous studies on patent policy is identified. Then, the model is applied to the aggregate data to quantify the extents of underinvestment in R&D and inefficiency arising from blocking patents. This numerical exercise suggests a number of findings. Firstly, the market economy underinvests in R&D so long as a non-negligible fraction of long-run TFP growth is driven by R&D. Secondly, eliminating blocking patents increases R&D by about two to six times and hence is an effective solution to the potential problem of R&D underinvestment. Finally, the effects of eliminating blocking patents on consumption in the long run and during the transition dynamics are considered.

• Item Type: MPRA Paper
• Institution: University of Michigan
• Language: English
• Keywords: blocking patents; endogenous growth; intellectual property rights; patent breadth; 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

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