Patents and Growth in OLG Economy with Physical Capital
We study the implications of patents in an overlapping-generations model with horizontal innovation of differentiated physical capital. We show that within this demographic structure of finitely lived agents, weakening patent protection generates two contradicting effects on innovation and growth. Weakening patent protection lowers the (average) price of patented machines, thereby increasing machine utilization, output, aggregate saving, and investment. However, a higher demand for machines shifts investment away from the R&D activity aimed at inventing new machine varieties, toward the formation of physical capital. The growth maximizing level of patent protection is incomplete and we show that shortening patent length is more effective than loosening patent breadth in spurring growth. Shorter patent length has an additional positive effect on growth by decreasing investment in old patents. Finally, we show that the welfare implications of shortening patent breadth depend on consumer time preference and the degree of machine specialization.
|Date of creation:||Sep 2017|
|Contact details of provider:|| Postal: 0326 Haley Center, Auburn University, AL 36849-5049|
Phone: (334) 844-4910
Fax: (334) 844-4615
Web page: http://cla.auburn.edu/economics/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:abn:wpaper:auwp2017-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hyeongwoo Kim)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.