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Patent, Inequality and Innovation-Driven Growth

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  • Hatipoglu, Ozan

Abstract

When people have hierarchic preferences inequality affects innovation-driven growth through the implied demand distribution over new goods. The paper examines the demand path of the firm through its life-cycle and analyzes the efficiency of dynamic resource allocation under different inequality scenarios. Unlike previous models of inequality and demand induced innovation, the innovators are protected by patents of finite length. Longer patents increase the profitability of an innovation because they reduce the effect of inequality by increasing the likelihood that the firms benefit from a future demand jump in sales to the poor. This result does not hold, however, when initial inequality is low or the purchasing power of the poor is high. Moreover, reducing inequality does not increase growth as long as the amount of redistribution is below a threshold level.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7855.

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Date of creation: 20 Mar 2008
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Handle: RePEc:pra:mprapa:7855

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Keywords: innovation dynamics; finite patents; hierarchic preferences; wealth inequality;

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References

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Cited by:
  1. 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.
  2. Chu, Angus C., 2012. "Global Poverty Reduction And Pareto-Improving Redistribution," Macroeconomic Dynamics, Cambridge University Press, vol. 16(04), pages 605-624, September.

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