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Finite Lifetimes, Patents' Length and Breadth, and Growth

Listed author(s):
  • Bharat Diwakar
  • Gilad Sorek

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.

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File URL: http://cla.auburn.edu/econwp/Archives/2016/2016-08.pdf
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Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2016-08.

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Date of creation: Jul 2016
Handle: RePEc:abn:wpaper:auwp2016-08
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  1. Engelhardt, Gary V. & Kumar, Anil, 2009. "The elasticity of intertemporal substitution: New evidence from 401(k) participation," Economics Letters, Elsevier, vol. 103(1), pages 15-17, April.
  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. Cysne, Rubens P. & Turchick, David, 2012. "Intellectual property rights protection and endogenous economic growth revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 851-861.
  4. Holger Strulik & Klaus Prettner & Alexia Prskawetz, 2013. "The past and future of knowledge-based growth," Journal of Economic Growth, Springer, vol. 18(4), pages 411-437, December.
  5. Jones, Larry E. & Manuelli, Rodolfo E., 1992. "Finite lifetimes and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 171-197, December.
  6. Masao Ogaki & Carmen M. Reinhart, 1998. "Measuring Intertemporal Substitution: The Role of Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1078-1098, October.
  7. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
  8. Uhlig, Harald & Yanagawa, Noriyuki, 1996. "Increasing the capital income tax may lead to faster growth," European Economic Review, Elsevier, vol. 40(8), pages 1521-1540, November.
  9. 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.
  10. Prettner, Klaus, 2014. "The non-monotonous impact of population growth on economic prosperity," Economics Letters, Elsevier, vol. 124(1), pages 93-95.
  11. Bharat Diwakar & Gilad Sorek, 2015. "Economic Development and Stage-Dependent IPR," Auburn Economics Working Paper Series auwp2015-16, Department of Economics, Auburn University.
  12. Sorek, Gilad, 2011. "Patents and quality growth in OLG economy," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 690-699.
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