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Effects of Patent Length on R&D: A Quantitative DGE Analysis

  • Chu, Angus C.

This paper develops an R&D-growth model and calibrates the model to aggregate data of the US economy to quantify a structural relationship between patent length, R&D and consumption. Under parameter values that match the empirical flow-profit depreciation rate of patents and other key features of the US economy, extending the patent length beyond 20 years leads to a negligible increase in R&D despite equilibrium R&D underinvestment. In contrast, shortening the patent length leads to a significant reduction in R&D and consumption. Finally, this paper also analytically derives and quantifies a dynamic distortionary effect of patent length on capital investment.

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File URL: http://mpra.ub.uni-muenchen.de/16918/1/MPRA_paper_16918.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16918.

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Date of creation: Aug 2009
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Handle: RePEc:pra:mprapa:16918
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  1. L. Rachel Ngai & Roberto M. Samaniego, 2009. "Accounting for research and productivity growth across industries," LSE Research Online Documents on Economics 25496, London School of Economics and Political Science, LSE Library.
  2. Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
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  4. 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.
  5. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
  6. Daron Acemoglu, 2007. "Introduction to Modern Economic Growth," Levine's Bibliography 122247000000001721, UCLA Department of Economics.
  7. Diego Comin, 2003. "R&D? A Small Contribution to Productivity Growth," Macroeconomics 0306007, EconWPA.
  8. Adam B. Jaffe & Josh Lerner, 2006. "Innovation and its Discontents," NBER Chapters, in: Innovation Policy and the Economy, Volume 6, pages 27-66 National Bureau of Economic Research, Inc.
  9. Charles I. Jones, . "Growth: With or Without Scale Effects?," Working Papers 99001, Stanford University, Department of Economics.
  10. O'Donoghue, Ted & Zweimüller, Josef, 1998. "Patents in a Model of Endogenous Growth," Economics Series 56, Institute for Advanced Studies.
  11. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-85, May.
  12. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  13. Kwan, Yum K. & Lai, Edwin L. -C., 2003. "Intellectual property rights protection and endogenous economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 853-873, March.
  14. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  15. 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.
  16. James Bessen, 2006. "The Value of U.S. Patents by Owner and Patent Characteristics," Working Papers 0603, Research on Innovation.
  17. 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.
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