Optimal Patent Protection in a Two‐Sector Economy

Abstract

International audienceThis article addresses the issue of optimal patent protection in an economy with a downstream and an upstream sector. The key insight is that higher patent protection in the downstream sector raises the incentives of agents to do R&D in that sector but discourages innovation in the upstream sector because of a market size effect. Hence, higher patent protection in the upstream sector accelerates growth whereas higher patent protection in the downstream sector slows it down. If some innovation is socially desirable, optimal patent protection is necessarily higher in the upstream than in the downstream sector

Effects of blocking patents on R&D: a quantitative DGE analysis

“…As a result, the model is less likely to overstate the extent of R&D underinvestment and the degree of blocking patents. Furthermore, the fact that the calibrated 13 The data is obtained from the National Science Foundation and the Bureau of Economic Analysis. R&D is net of federal spending, and GDP is net of government spending.…”

Intellectual Property and Product Market Competition Regulations in a Model with Two R&D Performing Sectors

“…Abstracting from the exchange of knowledge between sectors allows me to focus on the effect of regulations on innovation and growth through competition for factor inputs. Moreover, usually patent licensing is quite rare across broad sectors as compared to patent licensing within sectors (see, for a similar assumption, Goh andOlivier, 2002, Chu, 2011). The specification of knowledge spillovers process (17), together with the R&D process, has the attractive property of allowing the model to have a well defined balanced growth path.…”

“…The policy instrument governing intellectual property rights in both papers is patent breadth, which is defined by the power of patentees in the product market. The analysis of this paper is complementary to the analyses and results of Goh andOlivier (2002) andChu (2011) in a number of ways. In contrast to these papers, R&D in a firm improves the production process (or the quality) of a good and is performed in-house by the firm in the current paper.…”

“…This result holds when competition is intensified in one of these sectors and in both sectors. This paper is closely related to Goh and Olivier (2002) and Chu (2011). Goh and Olivier (2002) analyze the effects of changing the strength of intellectual property rights in a growth model with two vertically related sectors and Romer (1990) style R&D and firm entry.…”

“…This paper is closely related to Goh and Olivier (2002) and Chu (2011). Goh and Olivier (2002) analyze the effects of changing the strength of intellectual property rights in a growth model with two vertically related sectors and Romer (1990) style R&D and firm entry. Chu (2011) analyzes such effects in a growth model with two (horizontally related) sectors and Aghion and Howitt (1992) style R&D and firm entry/exit.…”