Finite Lifetimes, Patents' Length and Breadth, and Growth

We study the implications of patents breadth and duration (length) to growth and welfare, in an overlapping generations economy of finitely living agents. This demographic structure gives room to inter-generational trade in old patents and life-cycle saving motive, which prove to be relevant to the implications of different patent-policy dimensions. Patent breadth protection affects life-cycle saving and thereby aggregate investment, and the allocation investment between patents and physical capital. Patents duration affects also the stock of, and trade in, old patents. We show that, these unique characteristics of the OLG economy provide a case for incomplete patent breadth protection and finite patent duration, which are both growth and welfare enhancing. Furthermore, we show that the implications of patent policy to growth depend on whether the differentiated inputs are intermediate goods or investment goods. Our results contrast with the ones derived in previous studies that employed the same technologies and preferences in model economies of infinitely living agents. Hence, this work highlights the importance of the assumed demographic structure to the implications of patent policy.