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State-Dependent Intellectual Property Rights Policy

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  • Daron Acemoglu
  • Ufuk Akcigit

Abstract

What form of intellectual property rights (IPR) policy contributes to economic growth? Should technological followers be able to license the products of technological leaders? Should a company with a large technological lead receive the same IPR protection as a company with a more limited lead? We develop a general equilibrium framework to investigate these questions. The economy consists of many industries and firms engaged in cumulative (step-by-step) innovation. IPR policy regulates whether followers in an industry can copy the technology of the leader and also how much they have to pay to license past innovations. With full patent protection, followers can catch up to the leader in their industry either by making the same innovation(s) themselves or by making some pre-specified payments to the technological leaders. We prove the existence of a steady-state equilibrium and characterize some of its properties. We then quantitatively investigate the implications of different types of IPR policy on the equilibrium growth rate. The two major results of this exercise are as follows. First, the growth rate in the standard models used in the (growth) literature can be improved significantly by introducing a simple form of licensing. Second, we show that full patent protection is not optimal from the viewpoint of maximizing the growth rate of the economy and that the growth-maximizing policy involves state-dependent IPR protection, providing greater protection to technological leaders that are further ahead than those that are close to their followers. This form of the growth-maximizing policy is a result of the "trickle-down" effect, which implies that providing greater protection to firms that are further ahead of their followers than a certain threshold increases the R&D incentives also for all technological leaders that are less advanced than this threshold.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12775.

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Date of creation: Dec 2006
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Handle: RePEc:nbr:nberwo:12775

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Citations

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Cited by:
  1. John Vickers, 2010. "Competition Policy and Property Rights," Economic Journal, Royal Economic Society, vol. 120(544), pages 375-392, 05.
  2. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2010. "Does intellectual monopoly stimulate or stifle innovation?," MPRA Paper 31019, University Library of Munich, Germany, revised May 2011.
  3. Popov, V., 2011. "Do We Need to Protect Intellectual Property Rights?," Journal of the New Economic Association, New Economic Association, issue 11, pages 107-126.
  4. Dan Cao & Daron Acemoglu, 2011. "Innovation by Entrants and Incumbents," 2011 Meeting Papers 473, Society for Economic Dynamics.
  5. Steinmetz, Alexander, 2010. "Competition, innovation, and the effect of knowledge accumulation," W.E.P. - Würzburg Economic Papers 81, University of Würzburg, Chair for Monetary Policy and International Economics.
  6. Angus Chu, 2009. "Effects of blocking patents on R&D: a quantitative DGE analysis," Journal of Economic Growth, Springer, vol. 14(1), pages 55-78, March.
  7. Chu, Angus C., 2008. "Effects of Patent Policy on Income and Consumption Inequality in an R&D-Growth Model," MPRA Paper 10168, University Library of Munich, Germany.
  8. Christian Jaag, 2013. "Intellectual Property Rights and the Future of Universal Service Obligations in Communications," Working Papers 0040, Swiss Economics.

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