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Patent Protection, Technological Change and Wage Inequality: Theory

  • Shiyuan Pan

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

  • Tailong Li

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

  • Heng-fu Zou

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

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.

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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 537.

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Length: 21 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:cuf:wpaper:537
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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  1. Gilbert, R. & Shapiro, C., 1988. "Optimal Patent Length And Breadth," Papers 28, Princeton, Woodrow Wilson School - Discussion Paper.
  2. Chu, Angus C. & Pan, Shiyuan, 2013. "The Escape-Infringement Effect Of Blocking Patents On Innovation And Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 17(04), pages 955-969, June.
  3. Klemperer, Paul, 1990. "How Broad Should the Scope of Patent Protection Be?," CEPR Discussion Papers 392, C.E.P.R. Discussion Papers.
  4. Ryo Horii & Tatsuro Iwaisako, 2005. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Discussion Papers in Economics and Business 05-23, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  5. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
  6. Chu, Angus C., 2009. "The welfare cost of one-size-fit-all patent protection," MPRA Paper 21401, University Library of Munich, Germany, revised Mar 2010.
  7. Futagami, Koichi & Iwaisako, Tatsuro, 2007. "Dynamic analysis of patent policy in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 132(1), pages 306-334, January.
  8. Cozzi, Guido & Galli, Silvia, 2011. "Upstream innovation protection: common law evolution and the dynamics of wage inequality," MPRA Paper 31902, University Library of Munich, Germany.
  9. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
  10. Angus Chu, 2009. "Effects of blocking patents on R&D: a quantitative DGE analysis," Journal of Economic Growth, Springer, vol. 14(1), pages 55-78, March.
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