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Effects of Blocking Patents on R&D: A Quantitative DGE Analysis

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Author Info
Chu, Angus C.

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Abstract

What are the effects of blocking patents on R&D and consumption? This paper develops a quality-ladder growth model with overlapping intellectual property rights and capital accumulation to quantitatively evaluate the effects of blocking patents. The analysis focuses on two policy variables (a) patent breadth that determines the amount of profits created by an invention, and (b) the profit-sharing rule that determines the distribution of profits between current and former inventors along the quality ladder. The model is calibrated to aggregate data of the US economy. Under parameter values that match key features of the US economy and show equilibrium R&D underinvestment, I find that reducing the extent of blocking patents by changing the profit-sharing rule would lead to a significant increase in R&D, consumption and welfare. Also, the paper derives and quantifies a dynamic distortionary effect of patent policy on capital accumulation.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3910.

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Date of creation: Sep 2008
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Handle: RePEc:pra:mprapa:3910

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Related research
Keywords: blocking patents; endogenous growth; patent breadth; R&D;

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Find related papers by JEL classification:
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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