Working Paper: NBER ID: w15958
Authors: Daron Acemoglu; Gino Gancia; Fabrizio Zilibotti
Abstract: We study a dynamic general equilibrium model where innovation takes the form of the introduction new goods, whose production requires skilled workers. Innovation is followed by a costly process of standardization, whereby these new goods are adapted to be produced using unskilled labor. Our framework highlights a number of novel results. First, standardization is both an engine of growth and a potential barrier to it. As a result, growth in an inverse U-shaped function of the standardization rate (and of competition). Second, we characterize the growth and welfare maximizing speed of standardization. We show how optimal IPR policies affecting the cost of standardization vary with the skill-endowment, the elasticity of substitution between goods and other parameters. Third, we show that the interplay between innovation and standardization may lead to multiple equilibria. Finally, we study the implications of our model for the skill-premium and we illustrate novel reasons for linking North-South trade to intellectual property rights protection.
Keywords: Innovation; Standardization; Economic Growth; Intellectual Property Rights
JEL Codes: F43; O31; O33; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| standardization rate (J80) | growth (O40) |
| higher protection (D18) | growth (O40) |
| standardization (L15) | innovation (O35) |
| trade liberalization (F13) | growth (O40) |
| excessive standardization (L15) | expected returns from innovation (O36) |
| lower IPR protection (O34) | growth (O40) |