Working Paper: NBER ID: w21889
Authors: Eric Budish; Benjamin N. Roin; Heidi L. Williams
Abstract: A well-developed theoretical literature — dating back at least to Nordhaus (1969) — has analyzed optimal patent policy design. We re-present the core trade-off of the Nordhaus model and highlight an empirical question which emerges from the Nordhaus framework as a key input into optimal patent policy design: namely, what is the elasticity of R&D investment with respect to the patent term? We then review the — surprisingly small — body of empirical evidence that has been developed on this question over the nearly half century since the publication of Nordhaus's book.
Keywords: patents; research investments; elasticity of R&D investment
JEL Codes: O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing patent term (O34) | Eliciting additional R&D activity (O36) |
| Increasing patent term (O34) | Socially valuable inventions (O35) |
| Increasing patent term (O34) | Deadweight loss (H21) |
| Shortening clinical trial requirements (C41) | Increase R&D investments (O39) |
| Longer effective patent protections (O34) | Higher R&D investments for faster-to-market drugs (L65) |
| Elasticity of R&D investment with respect to patent term (O39) | Optimal patent policy design (O38) |
| Strengthened patent protections (O34) | No significant increase in R&D investment (O39) |