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Dynamics of Human Capital Accumulation, IPR Policy, and Growth

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

We study the effect of IPR (Intellectual Property Rights) policy on growth, in a closed overlapping-generations economy, which undergoes transitional development phase of human capital accumulation. We show that the growth-maximizing policy is stage-dependent: in the early development phase, during which innovation cost is high relative to worker productivity, weak IPR protection can expedite economic growth and may be necessary to escape long run stagnation. Weaker IPR protection erodes monopolistic deadweight loss and, thereby, increases aggregate output and saving. However, it also shifts investment away from R&D activity towards the formation of physical capital. We show that the former (positive) effect is dominant during the early development phase. However, as human capital is further accumulated, and labor productivity correspondingly increases, economic growth is maximized with stronger IPR protection.

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File URL: http://cla.auburn.edu/econwp/Archives/2016/2016-11.pdf
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Paper provided by Department of Economics, Auburn University in its series Auburn Economics Working Paper Series with number auwp2016-11.

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Date of creation: Oct 2016
Handle: RePEc:abn:wpaper:auwp2016-11
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Web page: http://cla.auburn.edu/economics/

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  1. 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.
  2. Daron Acemoglu & Ufuk Akcigit, 2012. "Intellectual Property Rights Policy, Competition And Innovation," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 1-42, 02.
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