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Patent Protection, Technological Change and Wage Inequality: Theory

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Shiyuan Pan & Tailong Li & Heng-fu Zou, 2012. "Patent Protection, Technological Change and Wage Inequality: Theory," CEMA Working Papers 537, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:537
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    References listed on IDEAS

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    1. Diwan, Ishac & Rodrik, Dani, 1991. "Patents, appropriate technology, and North-South trade," Journal of International Economics, Elsevier, pages 27-47.
    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. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    4. Ryo Horii & Tatsuro Iwaisako, 2007. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Journal of Economics, Springer, pages 45-85.
    5. Diwan, Ishac & Rodrik, Dani, 1991. "Patents, appropriate technology, and North-South trade," Journal of International Economics, Elsevier, pages 27-47.
    6. Ai-Ting Goh & Jacques Olivier, 2002. "Optimal Patent Protection in a Two-Sector Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1191-1214, November.
    7. Chu, Angus C., 2011. "The welfare cost of one-size-fits-all patent protection," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 876-890, June.
    8. Daron Acemoglu, 2003. "Patterns of Skill Premia," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 199-230.
    9. Paul Klemperer, 1990. "How Broad Should the Scope of Patent Protection Be?," RAND Journal of Economics, The RAND Corporation, pages 113-130.
    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.
    11. Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, pages 52-63.
    12. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, pages 106-112.
    13. Guido Cozzi & Silvia Galli, 2009. "Upstream Innovation Protection: Common Law Evolution and the Dynamics of Wage Inequality," Working Papers 2009_20, Business School - Economics, University of Glasgow.
    14. 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.
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    More about this item

    Keywords

    Patent Breadth; Skill-Biased Patent Protection; Skill-Biased Technological Change; Wage Inequality; Economic Growth;

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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