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Reinforcing the patent system? Effects of patent fences and knowledge diffusion on the development of new industries, technical progress and social welfare

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  • Murat YILDIZOGLU (GREThA UMR CNRS 5113)

Abstract

This article extends the industry dynamics model of Vallée & Yildizoglu (2006) in order to carry out a richer theoretical analysis of the consequences of a stronger patent system. This model explicitly takes into account the potentially positive effects of patents: publication of patents participates to the building of a collective knowledge stock on which new innovations can rely, and dropped patents can provide a source of technological progress for firms that are lagging behind the leaders of the industry. These dimensions of the patent system are used to question the negative results of Vallée & Yildizoglu (2006). The main results of the new model show that these positive effects do not counterbalance the negative effects of a stronger patent system on social welfare and global technological progress, even if it is a source of better protection and higher profits for the firms. The model also considers the effect of patents on the survival of the newly founded industries and on their development.

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Bibliographic Info

Paper provided by Groupe de Recherche en Economie Théorique et Appliquée in its series Cahiers du GREThA with number 2008-17.

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Date of creation: 2008
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Handle: RePEc:grt:wpegrt:2008-17

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Keywords: Innovation; Technical progress; Patent system; Intellectual property rights (IPR); Technology policy;

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  1. Adam B. Jaffe & Josh Lerner & Scott Stern, 2002. "Innovation Policy and the Economy, Volume 2," NBER Books, National Bureau of Economic Research, Inc, number jaff02-1.
  2. O'DONOGHUE, Ted & SCOTCHMER, Suzanne & THISSE, Jacques-François, . "Patent breadth, patent life, and the pace of technological progress," CORE Discussion Papers RP -1314, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Nancy Gallini & Suzanne Scotchmer, 2002. "Intellectual Property: When Is It the Best Incentive System?," Law and Economics 0201001, EconWPA.
  4. Adam B. Jaffe & Josh Lerner, 2006. "Innovation and its Discontents," NBER Chapters, in: Innovation Policy and the Economy, Volume 6, pages 27-66 National Bureau of Economic Research, Inc.
  5. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
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