Patent replacement and welfare gains
AbstractPatents were chosen in an era when modern public finance tools were unavailable. The same innovation outcomes can be achieved with higher welfare, if patent elements are replaced by modern features. This paper constructs two theoretical models of product innovation and simulates the welfare effects of replacing patents with an intertemporal-bounty arrangement. We find that replacing patents with this alternative has the potential to increase welfare in the United States through reform of pharmaceutical patents by $43.9-$194 billion when measured in present value terms (this is 0.3-1.3% of annual GDP) based on simulations involving four selected drug sectors. The potential to increase welfare would be higher if applied to the larger sector of drugs as a whole. In principal, patents could be replaced in other sectors as well.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 35 (2011)
Issue (Month): 9 (September)
Contact details of provider:
Web page: http://www.elsevier.com/locate/jedc
Patents Innovation Intertemporal bounty Monopoly distortion Welfare;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jon Gruber & Emmanuel Saez, 2000.
"The Elasticity of Taxable Income: Evidence and Implications,"
NBER Working Papers
7512, National Bureau of Economic Research, Inc.
- Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
- Steven Shavell & Tanguy van Ypersele, 1999.
"Rewards versus Intellectual Property Rights,"
NBER Working Papers
6956, National Bureau of Economic Research, Inc.
- Ypersele, T.P.M.C. van & Shavell, S., 1999. "Rewards versus Intellectual Property Rights," Discussion Paper, Tilburg University, Center for Economic Research 1999-26, Tilburg University, Center for Economic Research.
- SHAVELL, Steven & VAN YPERSELE, Tanguy, . "Rewards versus intellectual property rights," CORE Discussion Papers RP -1597, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Martin Feldstein, 1995.
"Tax Avoidance and the Deadweight Loss of the Income Tax,"
NBER Working Papers
5055, National Bureau of Economic Research, Inc.
- Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
- Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
- Neary, J. P. & Roberts, K. W. S., 1980.
"The theory of household behaviour under rationing,"
European Economic Review,
Elsevier, vol. 13(1), pages 25-42, January.
- Neary, J.P & Roberts, K.W.S, 1978. "The Theory of Household Behaviour under Rationing," The Warwick Economics Research Paper Series (TWERPS) 132, University of Warwick, Department of Economics.
- Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
- Earl L. Grinols, 2006. "The Intervention Principle," Review of International Economics, Wiley Blackwell, vol. 14(2), pages 226-247, 05.
- Kopczuk, Wojciech, 2003. "A note on optimal taxation in the presence of externalities," Economics Letters, Elsevier, vol. 80(1), pages 81-86, July.
- DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
- Helpman, Elhanan, 1993.
"Innovation, Imitation, and Intellectual Property Rights,"
Econometrica, Econometric Society,
Econometric Society, vol. 61(6), pages 1247-80, November.
- Elhanan Helpman, 1992. "Innovation, Imitation, and Intellectual Property Rights," NBER Working Papers 4081, National Bureau of Economic Research, Inc.
- Helpman, E., 1992. "Innovation, Imitation and intellectual Property Rights," Harvard Institute of Economic Research Working Papers 1597, Harvard - Institute of Economic Research.
- Grinols, Earl & Lin, Hwan C., 2006. "Global patent protection: channels of north and south welfare gain," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 30(2), pages 205-227, February.
- Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1137-1167, November.
- Krishna, Pravin & Panagariya, Arvind, 2000. "A unification of second best results in international trade," Journal of International Economics, Elsevier, vol. 52(2), pages 235-257, December.
- Eicher, Theo S. & Turnovsky, Stephen J., 2001. "Transitional dynamics in a two-sector non-scale growth model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(1-2), pages 85-113, January.
- Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, Econometric Society, vol. 52(1), pages 101-21, January.
- Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
- Dixit, Avinash, 1985. "Tax policy in open economies," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 6, pages 313-374 Elsevier.
- Earl L. Grinols & James W. Henderson, 2007. "Replace Pharmaceutical Patents Now," PharmacoEconomics, Springer Healthcare | Adis, Springer Healthcare | Adis, vol. 25(5), pages 355-363.
- Guesnerie Roger & Roberts Kevin, 1980.
"Effective policy tools and quantity controls,"
CEPREMAP Working Papers (Couverture Orange)
- Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, Econometric Society, vol. 53(3), pages 567-85, May.
- Lin, Hwan C., 2013. "Optimal Patent Life in a Variety-Expansion Growth Model," MPRA Paper 49790, University Library of Munich, Germany.
- repec:pra:mprapa:52608 is not listed on IDEAS
- Gómez, Manuel A. & Sequeira, Tiago N., 2014. "Should the US streamline its tax system? Analysis on an endogenous growth model," Economic Modelling, Elsevier, vol. 37(C), pages 113-119.
- Lin, Hwan C., 2012. "Switching from Patents to an Intertemporal Bounty in a Non-Scale Growth Model: Transitional Dynamics and Welfare Evaluation," MPRA Paper 49782, University Library of Munich, Germany, revised 12 Sep 2013.
- repec:dis:wpaper:dis1304 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.