IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Effects of Patent Policy on Income and Consumption Inequality in an R&D-Growth Model

  • Chu, Angus C.

What are the effects of strengthening patent protection on income and consumption inequality? To analyze this question, this paper incorporates heterogeneity in the initial wealth of households into a canonical quality-ladder growth model with endogenous labor supply. In this model, I firstly show that the aggregate economy always jumps immediately to a unique and stable balanced-growth path. Given the balanced-growth behavior of the aggregate economy and an exogenous distribution of initial wealth, I then show that the endogenous distribution of assets in subsequent periods is stationary and equal to its initial distribution. The model predicts that strengthening patent protection increases (a) economic growth by stimulating R&D investment and (b) income inequality by raising the return on assets. However, whether it also increases consumption inequality depends on the elasticity of intertemporal substitution. If and only if this elasticity is less (greater) than unity, strengthening patent protection increases (decreases) consumption inequality. For standard parameter values, strengthening patent protection leads to a larger increase in income inequality than consumption inequality.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://mpra.ub.uni-muenchen.de/10168/1/MPRA_paper_10168.pdf
File Function: original version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/12511/1/MPRA_paper_12511.pdf
File Function: revised version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/14472/1/MPRA_paper_14472.pdf
File Function: revised version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10168.

as
in new window

Length:
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:pra:mprapa:10168
Contact details of provider: Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 15-86 National Bureau of Economic Research, Inc.
  2. Zweimuller, Josef, 2000. " Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," Journal of Economic Growth, Springer, vol. 5(2), pages 185-206, June.
  3. Charles I. Jones & John C. Williams, 1999. "Too Much of a Good Thing? The Economics of Investment in R&D," NBER Working Papers 7283, National Bureau of Economic Research, Inc.
  4. Reed, Deborah & Cancian, Maria, 2001. "Sources of Inequality: Measuring the Contributions of Income Sources to Rising Family Income Inequality," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(3), pages 321-33, September.
  5. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  6. Reto Foellmi & Josef Zweimüller, . "Income Distribution and Demand-induced Innovations," IEW - Working Papers 212, Institute for Empirical Research in Economics - University of Zurich.
  7. Dirk Krueger & Fabrizio Perri, 2005. "Does income inequality lead to consumption equality? evidence and theory," Staff Report 363, Federal Reserve Bank of Minneapolis.
  8. Santiago Budria Rodriguez & Javier Diaz-Gimenez & Vincenzo Quadrini & Jose-Victor Rior-Rull, 2002. "Updated facts on the U.S. distributions of earnings, income, and wealth," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-35.
  9. Charles I. Jones & John C. Williams, 1998. "Measuring The Social Return To R&D," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1119-1135, November.
  10. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
  11. Cecilia García-Peñalosa & Stephen Turnovsky, 2006. "Growth and income inequality: a canonical model," Economic Theory, Springer, vol. 28(1), pages 25-49, 05.
  12. Li, Chol-Won, 2001. "On the Policy Implications of Endogenous Technological Progress," Economic Journal, Royal Economic Society, vol. 111(471), pages C164-79, May.
  13. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  14. repec:ubc:bricol:96-03 is not listed on IDEAS
  15. Ginarte, Juan C. & Park, Walter G., 1997. "Determinants of patent rights: A cross-national study," Research Policy, Elsevier, vol. 26(3), pages 283-301, October.
  16. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  17. Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-34, October.
  18. Edward N. Wolff, 1998. "Recent Trends in the Size Distribution of Household Wealth," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 131-150, Summer.
  19. Grossman, Gene M & Helpman, Elhanan, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 43-61, January.
  20. Daron Acemoglu & Ufuk Akcigit, 2006. "State-Dependent Intellectual Property Rights Policy," NBER Working Papers 12775, National Bureau of Economic Research, Inc.
  21. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  22. O'Donoghue, Ted & Zweimüller, Josef, 1998. "Patents in a Model of Endogenous Growth," Economics Series 56, Institute for Advanced Studies.
  23. Park, Walter G., 2008. "International patent protection: 1960-2005," Research Policy, Elsevier, vol. 37(4), pages 761-766, May.
  24. Jaffe Adam B. & Lerner Josh, 2006. "Innovation and Its Discontents," Capitalism and Society, De Gruyter, vol. 1(3), pages 1-36, December.
  25. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  26. Jaffe, Adam B., 2000. "The U.S. patent system in transition: policy innovation and the innovation process," Research Policy, Elsevier, vol. 29(4-5), pages 531-557, April.
  27. Nancy T. Gallini, 2002. "The Economics of Patents: Lessons from Recent U.S. Patent Reform," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 131-154, Spring.
  28. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
  29. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
  30. Goel, Rajeev K. & Payne, James E. & Ram, Rati, 2008. "R&D expenditures and U.S. economic growth: A disaggregated approach," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 237-250.
  31. Hatipoglu, Ozan, 2008. "Patent, Inequality and Innovation-Driven Growth," MPRA Paper 7855, University Library of Munich, Germany.
  32. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
  33. Goel, Rajeev K & Ram, Rati, 1994. "Research and Development Expenditures and Economic Growth: A Cross-Country Study," Economic Development and Cultural Change, University of Chicago Press, vol. 42(2), pages 403-11, January.
  34. Chou, Chien-Fu & Talmain, Gabriel, 1996. " Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-23, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:10168. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.