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Patent Protection, Financial Development and Economic Growth

Author

Listed:
  • Shiyuan Pan

    (Center for Research of Private Economy and School of Economics, Zhejiang University)

  • Mengbo Zhang

    (School of Economics, Zhejiang University)

  • Heng-fu Zou

    (Central University of Finance and Economics CEMA)

Abstract

This paper theoretically and empirically investigates the effects of patent protection on innovation and economic growth by looking at the interaction between patent system and financial system. On the one hand, patent protection accelerates economic growth through enhancing the value of innovation. On the other hand, it lowers the demand for capital by increasing the price, thereby weakening the learning-by-doing effect and raising the cost of production. It follows, in turn, patent protection stifles innovation. As a consequence, a non-monotonic relationship between patents and economic growth could be seen. In addition, the degree of patent protection that maximizes the growth rate is decreasing with the degree of financial development, when the interaction between patent system and financial system is considered. Our cross-section and panel regressions support our theoretical results.

Suggested Citation

  • Shiyuan Pan & Mengbo Zhang & Heng-fu Zou, 2011. "Patent Protection, Financial Development and Economic Growth," CEMA Working Papers 589, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:589
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    References listed on IDEAS

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    More about this item

    Keywords

    Patent Protection; Financial development; Innovation; Economic Growth;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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