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Welfare Effects Of Patent Protection In A Semi-Endogenous Growth Model

Author

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  • Iwaisako, Tatsuro

Abstract

This paper examines how strengthening patent protection affects welfare in a nonscale quality-ladder model, which was developed by Segerstrom [American Economic Review 88, 1290–1310] and generalized by Li [American Economic Review 93, 1009–1017]. In the Segerstrom–Li model, patent protection creates no distortion in static allocation among the production sectors. In order to examine the welfare effects of strengthening patent protection adequately, we incorporate a competitive outside good into the Segerstrom–Li model. In the general model, we derive the welfare-maximizing degree of patent protection analytically by utilizing a linear approximation of the transition path. The result shows that the welfare-maximizing degree of patent protection is weaker when the market share of the outside good is positive than when it is zero. In other words, disregarding the static distortion that patent protection creates leads to excessive patent protection.

Suggested Citation

  • Iwaisako, Tatsuro, 2020. "Welfare Effects Of Patent Protection In A Semi-Endogenous Growth Model," Macroeconomic Dynamics, Cambridge University Press, vol. 24(3), pages 708-728, April.
    • Handle: RePEc:cup:macdyn:v:24:y:2020:i:3:p:708-728_7
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    Cited by:

    1. Bom, Pedro R.D. & Stojanovikj, Martin, 2025. "Patent policy at a tipping point: Why stronger patent protection may not foster economic growth," Economic Modelling, Elsevier, vol. 153(C).
    2. Hu, Mei-Ying & Lu, You-Xun & Lai, Ching-chong, 2023. "Patent term extensions and commercialization lags in the pharmaceutical industry: A growth-theoretic analysis," Journal of Macroeconomics, Elsevier, vol. 76(C).
    3. Lu, You-Xun & Lai, Ching-Chong, 2021. "Effects of patent policy on growth and inequality: A perspective of exogenous and endogenous quality improvements," MPRA Paper 111183, University Library of Munich, Germany.
    4. Ohki, Kazuyoshi, 2025. "Incremental Innovation by Heterogeneous Incumbents and Economic Growth: relationship between two sources of growth," MPRA Paper 124304, University Library of Munich, Germany.
    5. Chu, Angus C. & Kou, Zonglai & Wang, Xilin, 2023. "Class struggle in a Schumpeterian economy," China Economic Review, Elsevier, vol. 82(C).
    6. Ohki, Kazuyoshi, 2023. "Disruptive innovation by heterogeneous incumbents and economic growth: When do incumbents switch to new technology?," Journal of Mathematical Economics, Elsevier, vol. 107(C).
    7. You-Xun Lu & Ching-Chong Lai & Po-Yang Yu, 2024. "Effects of patent policy on growth and inequality: exogenous versus endogenous quality improvements," Journal of Economics, Springer, vol. 141(1), pages 1-28, January.
    8. Lu, You-Xun, 2022. "Interactive effects of monetary policy and patent protection: The role of endogenous innovation size," Economic Modelling, Elsevier, vol. 113(C).
    9. Angus C. Chu, 2022. "Patent policy and economic growth: A survey," Manchester School, University of Manchester, vol. 90(2), pages 237-254, March.

    More about this item

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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