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Patent Protection, Financial Development and Economic Growth

  • Shiyuan Pan

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

  • Mengbo Zhang

    (School of Economics, Zhejiang University)

  • Heng-fu Zou

    (Central University of Finance and Economics CEMA)

This paper theoretically and empirically investigates the effects of patent protection on innovation and economic growth by looking at the interaction between patent system and financial system. On the one hand, patent protection accelerates economic growth through enhancing the value of innovation. On the other hand, it lowers the demand for capital by increasing the price, thereby weakening the learning-by-doing effect and raising the cost of production. It follows, in turn, patent protection stifles innovation. As a consequence, a non-monotonic relationship between patents and economic growth could be seen. In addition, the degree of patent protection that maximizes the growth rate is decreasing with the degree of financial development, when the interaction between patent system and financial system is considered. Our cross-section and panel regressions support our theoretical results.

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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 589.

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Length: 40 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:cuf:wpaper:589
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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