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Patent Protection, Technological Change and Wage Inequality

  • Shiyuan Pan

    (School of Economics and Center for Research of Private Economy, Zhejiang University)

  • Heng-fu Zou

    (Central University of Finance and Economics CEMA
    Wuhan University IAS
    Peking University
    China Development Bank)

  • Tailong Li

    (School of Economics & Management, Zhejiang Sci-Tech University)

We develop a directed-technological-change model to address the issue of the optimal patent system and investigate how the optimal patent system influences the direction of technological change and the inequality of wage, where patents are categorized as skill- and labor-complementary. The major results are: (i) Finite patent breadth maximizes the social welfare level; (ii) Optimal patent breadth increases with the amount of skilled (unskilled) workers; (iii) Optimal patent protection is skill-biased, because an increase in the amount of skilled workers increases the dynamic benefits of the protection for skill-complementary patents via the economy of scale of skill-complementary technology; (iv) Skill-biased patent protection skews inventions towards skills, thus increasing wage inequality; And, (v) international trade leads to strong protection for skill-complementary patents, hence increasing skill premia.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 437.

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Length: 33 pages
Date of creation: 14 Aug 2010
Date of revision:
Handle: RePEc:cuf:wpaper:437
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