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Sequential R&D and Blocking Patents in the Dynamics of Growth

  • Guido Cozzi

    ()

    (Durham Business School)

  • Silvia Galli

    (Hull University Business School)

The incentives to conduct basic or applied research play a central role for economic growth. How does increasing early innovation appropriability affect basic research, applied research, education, and wage inequality? This paper analyzes the macroeconomic effects of patent protection by incorporating a two-stage cumulative innovation structure into a quality-ladder growth model with skill acquisition. We focus on two issues (a) the over-protection vs. the under-protection of intellectual property rights in basic research; (b) the evolution of jurisprudence shaping the bargaining power of the upstream innovators. We show that the dynamic general equilibrium interations may seriously mislead the empirical assessment of the growth effects of IPR policy: stronger protection of upstream innovation always looks bad in the short- and possibly medium-run. We argue that in a common law system an explictly dynamic macroeconomic analysis is appropriate. We also provide a simple "rule of thumb" indicator of the basic researcher bargaining power.

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Paper provided by Durham University Business School in its series Working Papers with number 2012_02.

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Date of creation: 10 Feb 2012
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Handle: RePEc:dur:durham:2012_02
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