IDEAS home Printed from https://ideas.repec.org/p/usg/econwp/201305.html
   My bibliography  Save this paper

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

Author

Listed:
  • Cozzi, Guido
  • Galli, Silvia

Abstract

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, innovation and growth? In a common law system an explicitly dynamic macroeconomic analysis is appropriate. This paper analyzes the macroeconomic effects of patent protection by incorporating a twostage 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 interactions 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 also provide a simple "rule of thumb" indicator of the basic researcher bargaining power.

Suggested Citation

  • Cozzi, Guido & Galli, Silvia, 2013. "Sequential R&D and Blocking Patents in the Dynamics of Growth," Economics Working Paper Series 1305, University of St. Gallen, School of Economics and Political Science.
    • Handle: RePEc:usg:econwp:2013:05
    as

    Download full text from publisher

    File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1305.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cozzi, Guido, 2001. "Inventing or Spying? Implications for Growth," Journal of Economic Growth, Springer, vol. 6(1), pages 55-77, March.
    2. Gerald A. Carlino & Satyajit Chatterjee & Robert M. Hunt, 2001. "Knowledge spillovers and the new economy of cities," Working Papers 01-14, Federal Reserve Bank of Philadelphia.
    3. 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.
    4. Jerry R. Green & Suzanne Scotchmer, 1995. "On the Division of Profit in Sequential Innovation," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 20-33, Spring.
    5. Ufuk Akcigit & Douglas Hanley & Nicolas Serrano-Velarde, 2021. "Back to Basics: Basic Research Spillovers, Innovation Policy, and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 1-43.
    6. Gennaioli, Nicola & Shleifer, Andrei, 2007. "Overruling and the instability of law," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 309-328, June.
    7. Raouf Boucekkine & David de la Croix & Dominique Peeters, 2007. "Early Literacy Achievements, Population Density, and the Transition to Modern Growth," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 183-226, March.
    8. Nicola Gennaioli & Andrei Shleifer, 2007. "The Evolution of Common Law," Journal of Political Economy, University of Chicago Press, vol. 115(1), pages 43-68.
    9. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    10. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 469-497.
    11. Gersbach, Hans & Schneider, Maik & Schneller, Olivier, 2010. "Optimal Mix of Applied and Basic Research, Distance to Frontier, and Openness," CEPR Discussion Papers 7795, C.E.P.R. Discussion Papers.
    12. Jones, Charles I & Williams, John C, 2000. "Too Much of a Good Thing? The Economics of Investment in R&D," Journal of Economic Growth, Springer, vol. 5(1), pages 65-85, March.
    13. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    14. Aghion, Philippe & Tirole, Jean, 1994. "Opening the black box of innovation," European Economic Review, Elsevier, vol. 38(3-4), pages 701-710, April.
    15. Theo Eicher & Cecilia García-Peñalosa, 2008. "Endogenous Strength of Intellectual Property Rights," Working Papers UWEC-2007-14-P, University of Washington, Department of Economics.
    16. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    17. Galasso, Alberto & Schankerman, Mark, 2013. "Patents and Cumulative Innovation:Causal Evidence from the Courts," IIR Working Paper 13-16, Institute of Innovation Research, Hitotsubashi University.
    18. Smulders, Sjak & van de Klundert, Theo, 1995. "Imperfect competition, concentration and growth with firm-specific R & D," European Economic Review, Elsevier, vol. 39(1), pages 139-160, January.
    19. Luca Spinesi, 2012. "Heterogeneous Academic‐Industry Knowledge Linkage, Heterogeneous IPR, and Growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(1), pages 67-98, February.
    20. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2012. "Does intellectual monopoly stimulate or stifle innovation?," European Economic Review, Elsevier, vol. 56(4), pages 727-746.
    21. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    22. Kiley, Michael T, 1999. "The Supply of Skilled Labour and Skill-Biased Technological Progress," Economic Journal, Royal Economic Society, vol. 109(458), pages 708-724, October.
    23. Bronwyn H. Hall, 2009. "Business And Financial Method Patents, Innovation, And Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(4), pages 443-473, September.
    24. Angus Chu, 2009. "Effects of blocking patents on R&D: a quantitative DGE analysis," Journal of Economic Growth, Springer, vol. 14(1), pages 55-78, March.
    25. Eli Berman & John Bound & Zvi Griliches, 1994. "Changes in the Demand for Skilled Labor within U. S. Manufacturing: Evidence from the Annual Survey of Manufactures," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 367-397.
    26. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    27. Anthony Niblett & Richard A. Posner & Andrei Shleifer, 2010. "The Evolution of a Legal Rule," The Journal of Legal Studies, University of Chicago Press, vol. 39(2), pages 325-358.
    28. Angus C. Chu, 2008. "Special Interest Politics And Intellectual Property Rights: An Economic Analysis Of Strengthening Patent Protection In The Pharmaceutical Industry," Economics and Politics, Wiley Blackwell, vol. 20(2), pages 185-215, June.
    29. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1119-1135.
    30. Martin Ellison & Godfrey Keller & Kevin Roberts & Margaret Stevens, 2014. "Unemployment and market size," Economic Journal, Royal Economic Society, vol. 124(575), pages 119-148, March.
    31. Boucekkine, Raouf & de la Croix, David & Licandro, Omar, 2002. "Vintage Human Capital, Demographic Trends, and Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 104(2), pages 340-375, June.
    32. Guido Cozzi & Silvia Galli, 2009. "Science-Based R&D In Schumpeterian Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(s1), pages 474-491, September.
    33. Elias Dinopoulos & Peter Thompson, 1999. "Scale effects in Schumpeterian models of economic growth," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 157-185.
    34. Joonkyung Ha & Peter Howitt, 2007. "Accounting for Trends in Productivity and R&D: A Schumpeterian Critique of Semi-Endogenous Growth Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 733-774, June.
    35. Jakob Madsen, 2008. "Semi-endogenous versus Schumpeterian growth models: testing the knowledge production function using international data," Journal of Economic Growth, Springer, vol. 13(1), pages 1-26, March.
    36. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1185-1209.
    37. Paul Segerstrom & Elias Dinopoulos, 1999. "A Schumpeterian Model of Protection and Relative Wages," American Economic Review, American Economic Association, vol. 89(3), pages 450-472, June.
    38. 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.
    39. Ted O'Donoghue & Josef Zweimueller, 2004. "Patents in a Model of Endogenous Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 81-123, March.
    40. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    41. Aghion, Philippe & Howitt, Peter, 1996. "Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
    42. Chu, Angus C., 2011. "The welfare cost of one-size-fits-all patent protection," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 876-890, June.
    43. Bronwyn H. Hall, 2009. "Business And Financial Method Patents, Innovation, And Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(s1), pages 443-473, September.
    44. Guido Cozzi & Giammario Impullitti, 2010. "Government Spending Composition, Technical Change, and Wage Inequality," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1325-1358, December.
    45. Furukawa, Yuichi, 2007. "The protection of intellectual property rights and endogenous growth: Is stronger always better?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3644-3670, November.
    46. Eicher, Theo & García-Peñalosa, Cecilia, 2008. "Endogenous strength of intellectual property rights: Implications for economic development and growth," European Economic Review, Elsevier, vol. 52(2), pages 237-258, February.
    47. Schankerman, Mark & Galasso, Alberto, 2013. "Patents and Cumulative Innovation: Causal Evidence from the Courts," CEPR Discussion Papers 9458, C.E.P.R. Discussion Papers.
    48. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    49. Robert M. Hunt, 2001. "You can patent that? Are patents on computer programs and business methods good for the new economy?," Business Review, Federal Reserve Bank of Philadelphia, issue Q1, pages 5-15.
    50. Gerald A. Carlino, 2001. "Knowledge spillovers: cities' role in the new economy," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 17-26.
    51. Fon, Vincy & Parisi, Francesco, 2006. "Judicial precedents in civil law systems: A dynamic analysis," International Review of Law and Economics, Elsevier, vol. 26(4), pages 519-535, December.
    52. Gould, Eric D & Moav, Omer & Weinberg, Bruce A, 2001. "Precautionary Demand for Education, Inequality, and Technological Progress," Journal of Economic Growth, Springer, vol. 6(4), pages 285-315, December.
    53. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635, December.
    54. Angus C. Chu, 2010. "Effects of Patent Policy on Income and Consumption Inequality in a R&D Growth Model," Southern Economic Journal, John Wiley & Sons, vol. 77(2), pages 336-350, October.
    55. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
    56. Alberto Galasso & Mark Schankerman, 2014. "Patents and Cumulative Innovation: Causal Evidence from the Courts," NBER Working Papers 20269, National Bureau of Economic Research, Inc.
    57. Hans Gersbach & Maik Schneider & Olivier Schneller, 2013. "Basic research, openness, and convergence," Journal of Economic Growth, Springer, vol. 18(1), pages 33-68, March.
    58. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    59. Luca, SPINESI, 2007. "IPR for Public and Private Innovations, and Growth," Discussion Papers (ECON - Département des Sciences Economiques) 2007015, Université catholique de Louvain, Département des Sciences Economiques.
    60. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    61. Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-330, April.
    62. Peretto, Pietro F., 1999. "Cost reduction, entry, and the interdependence of market structure and economic growth," Journal of Monetary Economics, Elsevier, vol. 43(1), pages 173-195, February.
    63. Guido Cozzi & Silvia Galli, 2009. "Science‐Based R&D In Schumpeterian Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(4), pages 474-491, September.
    64. Alberto Galasso & Mark Schankerman, 2013. "Patents and Cumulative Innovation: Causal Evidence from the Courts," CEP Discussion Papers dp1205, Centre for Economic Performance, LSE.
    65. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-1091, December.
    66. Galasso, Alberto & Schankerman, Mark, 2013. "Patents and cumulative innovation: causal evidence from the courts," LSE Research Online Documents on Economics 51539, London School of Economics and Political Science, LSE Library.
    67. Peter Howitt, 1999. "Steady Endogenous Growth with Population and R & D Inputs Growing," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 715-730, August.
    68. Cozzi Guido, 2007. "The Arrow Effect under Competitive R&D," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-20, January.
    69. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-335, December.
    70. Sener, Fuat, 2001. "Schumpeterian unemployment, trade and wages," Journal of International Economics, Elsevier, vol. 54(1), pages 119-148, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guido Cozzi & Silvia Galli, 2009. "Upstream Innovation Protection: Common Law Evolution and the Dynamics of Wage Inequality," Working Papers 2009_20, Business School - Economics, University of Glasgow.
    2. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2012. "Does intellectual monopoly stimulate or stifle innovation?," European Economic Review, Elsevier, vol. 56(4), pages 727-746.
    3. Angus C. Chu & Yuichi Furukawa & Sushanta Mallick & Pietro Peretto & Xilin Wang, 2021. "Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1429-1465, June.
    4. Angus C. Chu & Yuichi Furukawa & Lei Ji, 2016. "Patents, R&D subsidies, and endogenous market structure in a schumpeterian economy," Southern Economic Journal, John Wiley & Sons, vol. 82(3), pages 809-825, January.
    5. Angus Chu & Guido Cozzi & Chih-Hsing Liao, 2013. "Endogenous fertility and human capital in a Schumpeterian growth model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(1), pages 181-202, January.
    6. Elie Gray & André Grimaud, 2014. "The Lindahl Equilibrium in Schumpeterian Growth Models: Knowledge Diffusion, Social Value of Innovations and Optimal R&D Incentives," CESifo Working Paper Series 4678, CESifo.
    7. Lu, You-Xun & Lai, Ching-Chong, 2021. "Effects of patent policy on growth and inequality: A perspective of exogenous and endogenous quality improvements," MPRA Paper 111183, University Library of Munich, Germany.
    8. Gray, Elie & Grimaud, André, 2014. "The Lindahl equilibrium in Schumpeterian growth models: Knowledge diffusion, social value of innovations and optimal R&D incentives," TSE Working Papers 14-469, Toulouse School of Economics (TSE).
    9. Cozzi, Guido & Galli, Silvia, 2021. "Privatization of knowledge: Did the U.S. get it right?," Economic Modelling, Elsevier, vol. 98(C), pages 179-191.
    10. Cozzi, Guido & Galli, Silvia, 2011. "Privatization of Knowledge: Did the U.S. Get It Right? (New Version)," MPRA Paper 29710, University Library of Munich, Germany.
    11. Gray, Elie & Grimaud, André, 2014. "The Lindahl equilibrium in Schumpeterian growth models: Knowledge diffusion, social value of innovations and optimal R&D incentives," IDEI Working Papers 821, Institut d'Économie Industrielle (IDEI), Toulouse.
    12. Chu, Angus C. & Furukawa, Yuichi, 2011. "On the optimal mix of patent instruments," Journal of Economic Dynamics and Control, Elsevier, vol. 35(11), pages 1964-1975.
    13. Elie Gray & André Grimaud, 2016. "The Lindahl equilibrium in Schumpeterian growth models," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 101-142, March.
    14. Angus C. Chu, 2022. "Patent policy and economic growth: A survey," Manchester School, University of Manchester, vol. 90(2), pages 237-254, March.
    15. Chu, Angus, 2021. "Macroeconomic Effects of Intellectual Property Rights: An Updated Survey," MPRA Paper 110839, University Library of Munich, Germany.
    16. Angus Chu & Guido Cozzi, 2018. "Effects of Patents versus R&D subsidies on Income Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 68-84, July.
    17. Guido Cozzi & Giammario Impullitti, 2010. "Government Spending Composition, Technical Change, and Wage Inequality," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1325-1358, December.
    18. Angus C. Chu & Yuichi Furukawa, 2013. "Patentability and Knowledge Spillovers of Basic R&D," Southern Economic Journal, John Wiley & Sons, vol. 79(4), pages 928-945, April.
    19. Guido Cozzi & Silvia Galli, 2009. "Science-Based R&D In Schumpeterian Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(s1), pages 474-491, September.
    20. Luca Spinesi, 2022. "The Environmental Tax: Effects on Inequality and Growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(3), pages 529-572, July.

    More about this item

    Keywords

    Endogenous Growth; Basic and Applied Research; Endogenous Technological Change; Common Law.;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usg:econwp:2013:05. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/vwasgch.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.