Working Paper: CEPR ID: DP1951
Authors: Ted O'Donoghue; Josef Zweimüller
Abstract: This paper examines patent protection in an endogenous-growth model. Our aim is two-fold. First, we show how the patent policies discussed by the recent patent-design literature can influence R&D in the endogenous-growth framework, where the role of patents has been largely ignored. Second, we explore how the general-equilibrium framework contributes to the results of the patent-design literature. In a general-equilibrium model, both incentives to innovate and monopoly distortions depend on the proportion of industries that conduct R&D. Furthermore, patents affect the allocation of R&D resources across industries, and patents can distort resources away from industries where they are most productive.
Keywords: innovation; patent policy; intellectual property; patent design
JEL Codes: 031; 034; 038
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Patent policies (O34) | R&D investment (O32) |
| Stronger patent protection (O34) | Increased profits for successful firms (L21) |
| Increased profits for successful firms (L21) | Aggregate income (E10) |
| Aggregate income (E10) | Demand (R22) |
| Demand (R22) | All industries (L89) |
| Stronger patent protection (O34) | Resource allocation (D45) |
| Resource allocation (D45) | Innovation outcomes (O36) |
| Patent policies (O34) | Misallocation of R&D resources (O32) |
| Misallocation of R&D resources (O32) | Industries with higher rates of creative destruction (L16) |