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Patentability and Knowledge Spillovers of Basic R&D

  • Angus C. Chu

    ()

    (Durham University Business School, Durham University, Durham, UK; and School of Economics, Shanghai University of Finance and Economics, Shanghai, China)

  • Yuichi Furukawa

    ()

    (School of Economics, Chukyo University, Nagoya, Japan; and Department of Economics, Simon Fraser University, Burnaby, Canada; corresponding author)

This study develops a research and development (R&D)–based growth model with basic and applied research to analyze the growth and welfare effects of two patent instruments: (i) the patentability of basic R&D and (ii) the division of profit between basic and applied researchers. We find that for the purpose of stimulating basic R&D and economic growth simultaneously, increasing the share of profit assigned to basic researchers is more effective than raising the patentability of basic R&D, which has either a negative effect or an inverted-U effect on technological progress. However, a benevolent patent authority requires both patent instruments to achieve the socially optimal allocation in the decentralized economy.

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File URL: http://dx.doi.org/10.4284/0038-4038-2011.207
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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 79 (2013)
Issue (Month): 4 (April)
Pages: 928-945

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Handle: RePEc:sej:ancoec:v:79:4:y:2013:p:928-945
Contact details of provider: Web page: http://www.southerneconomic.org/

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  1. Ted O'Donoghue & Josef Zweimueller, 2004. "Patents in a Model of Endogenous Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 81-123, 03.
  2. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
  3. Guido Cozzi & Silvia Galli, 2009. "Upstream Innovation Protection: Common Law Evolution and the Dynamics of Wage Inequality," Working Papers 2009_20, Business School - Economics, University of Glasgow.
  4. Ryo Horii & Tatsuro Iwaisako, 2005. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Discussion Papers in Economics and Business 05-23-Rev., Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Apr 2006.
  5. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
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  7. Horowitz, Andrew W & Lai, Edwin L-C, 1996. "Patent Length and the Rate of Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 785-801, November.
  8. Josh Lerner, 2009. "The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues," American Economic Review, American Economic Association, vol. 99(2), pages 343-48, May.
  9. Aghion, Philippe & Howitt, Peter, 1996. "Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
  10. Furukawa, Yuichi, 2007. "The protection of intellectual property rights and endogenous growth: Is stronger always better?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3644-3670, November.
  11. Kwan, Yum K. & Lai, Edwin L. -C., 2003. "Intellectual property rights protection and endogenous economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 853-873, March.
  12. Futagami, Koichi & Iwaisako, Tatsuro, 2007. "Dynamic analysis of patent policy in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 132(1), pages 306-334, January.
  13. Claudio Michelacci, 2003. "Low Returns in R&D Due to the Lack of Entrepreneurial Skills," Economic Journal, Royal Economic Society, vol. 113(484), pages 207-225, January.
  14. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-85, May.
  15. Chu, Angus C., 2009. "The welfare cost of one-size-fit-all patent protection," MPRA Paper 21401, University Library of Munich, Germany, revised Mar 2010.
  16. Furukawa, Yuichi, 2010. "Intellectual property protection and innovation: an inverted-U relationship," Economics Letters, Elsevier, vol. 109(2), pages 99-101, November.
  17. Guido Cozzi & Silvia Galli, 2009. "Science-Based R&D in Schumpeterian Growth," Working Papers 2009_19, Business School - Economics, University of Glasgow.
  18. Li, Chol-Won, 2001. "On the Policy Implications of Endogenous Technological Progress," Economic Journal, Royal Economic Society, vol. 111(471), pages C164-79, May.
  19. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  20. Cozzi, Guido, 2001. "Inventing or Spying? Implications for Growth," Journal of Economic Growth, Springer, vol. 6(1), pages 55-77, March.
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