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Dynamic Effects of Patent Policy on Innovation and Inequality in a Schumpeterian Economy

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  • Chu, Angus C.
  • Furukawa, Yuichi
  • Mallick, Sushanta
  • Peretto, Pietro
  • Wang, Xilin

Abstract

This study explores the dynamic effects of patent policy on innovation and income inequality in a Schumpeterian growth model with endogenous market structure and heterogeneous households. We find that strengthening patent protection has a positive effect on economic growth and a positive or an inverted-U effect on income inequality when the number of differentiated products is fixed in the short run. However, when the number of products adjusts endogenously, the effects of patent protection on growth and inequality become negative in the long run. We also calibrate the model to US data to perform a quantitative analysis and find that the long-run negative effect of patent policy on inequality is much larger than its short-run positive effect. This result is consistent with our empirical finding from a panel vector autoregression.

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  • Chu, Angus C. & Furukawa, Yuichi & Mallick, Sushanta & Peretto, Pietro & Wang, Xilin, 2019. "Dynamic Effects of Patent Policy on Innovation and Inequality in a Schumpeterian Economy," MPRA Paper 96240, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:96240
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    More about this item

    Keywords

    patent policy; income inequality; innovation; endogenous market structure;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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