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Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy

Author

Listed:
  • Angus C. Chu

    (University of Liverpool)

  • Yuichi Furukawa

    (Aichi University)

  • Sushanta Mallick

    (Queen Mary University of London)

  • Pietro Peretto

    (Duke University)

  • Xilin Wang

    (Fudan University)

Abstract

This study explores the dynamic effects of patent policy on innovation and income inequality in a Schumpeterian growth model with endogenous market structure and heterogeneous households. We find that strengthening patent protection has a positive effect on economic growth and a positive or an inverted-U effect on income inequality when the number of differentiated products is fixed in the short run. However, when the number of products adjusts endogenously, the effects of patent protection on growth and inequality become negative in the long run. We also calibrate the model to US data to perform a quantitative analysis and find that the long-run negative effect of patent policy on inequality is much larger than its short-run positive effect. This result remains consistent with our empirical finding from a panel vector autoregression.

Suggested Citation

  • Angus C. Chu & Yuichi Furukawa & Sushanta Mallick & Pietro Peretto & Xilin Wang, 2021. "Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1429-1465, June.
  • Handle: RePEc:spr:joecth:v:71:y:2021:i:4:d:10.1007_s00199-021-01357-6
    DOI: 10.1007/s00199-021-01357-6
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    Cited by:

    1. Chu, Angus & Kou, Zonglai & Wang, Xilin, 2021. "Class Struggle in a Schumpeterian Economy," MPRA Paper 110479, University Library of Munich, Germany.
    2. Song, Xueyin & Huang, Xianhai & Qing, Tao, 2021. "Intellectual property rights protection and quality upgrading: Evidence from China," Economic Modelling, Elsevier, vol. 103(C).
    3. Keneck-Massil, Joseph & Nomo-Beyala, Clery & Owoundi, Ferdinand, 2021. "The corruption and income inequality puzzle: Does political power distribution matter?," Economic Modelling, Elsevier, vol. 103(C).
    4. Christian Kiedaisch, 2021. "Growth and welfare effects of intellectual property rights when consumers differ in income," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1121-1170, November.
    5. Nemlioglu, Ilayda & Mallick, Sushanta, 2021. "Effective innovation via better management of firms: The role of leverage in times of crisis," Research Policy, Elsevier, vol. 50(7).
    6. Chu, Angus C., 2020. "Inflation, Innovation and Growth: A Survey," MPRA Paper 103740, University Library of Munich, Germany.
    7. Chu, Angus C., 2020. "Patent Policy and Economic Growth: A Survey," MPRA Paper 103643, University Library of Munich, Germany.
    8. Chu, Angus, 2021. "Macroeconomic Effects of Intellectual Property Rights: An Updated Survey," MPRA Paper 110839, University Library of Munich, Germany.

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    More about this item

    Keywords

    Patent policy; Income inequality; Innovation; Endogenous market structure;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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