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. 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.
    3. 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.
    4. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    5. Gennaioli, Nicola & Shleifer, Andrei, 2007. "Overruling and the instability of law," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 309-328, June.
    6. 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.
    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, pages 43-68.
    9. 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.
    10. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    11. Galasso, Alberto & Schankerman, Mark, 2013. "Patents and Cumulative Innovation: Causal Evidence from the Courts," CEPR Discussion Papers 9458, C.E.P.R. Discussion Papers.
    12. 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.
    13. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
    14. Peretto, Pietro F, 1998. "Technological Change and Population Growth," Journal of Economic Growth, Springer, vol. 3(4), pages 283-311, December.
    15. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 469-497.
    16. 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.
    17. 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.
    18. Nicolas Serrano-Velarde & Douglas Hanley & Ufuk Akcigit, 2012. "Back to Basics: Basic Research Spillovers, Innovation Policy and Growth," 2012 Meeting Papers 665, Society for Economic Dynamics.
    19. 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.
    20. Gerald A. Carlino, 2001. "Knowledge spillovers: cities' role in the new economy," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 17-26.
    21. 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.
    22. 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.
    23. Aghion, Philippe & Tirole, Jean, 1994. "Opening the black box of innovation," European Economic Review, Elsevier, vol. 38(3-4), pages 701-710, April.
    24. 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.
    25. 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.
    26. James Bessen & Eric Maskin, 2009. "Sequential innovation, patents, and imitation," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 611-635.
    27. 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.
    28. Charles I. Jones & John C. Williams, 1998. "Measuring the Social Return to R&D," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1119-1135.
    29. 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.
    30. 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.
    31. 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.
    32. 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.
    33. Alberto Galasso & Mark Schankerman, 2014. "Patents and Cumulative Innovation: Causal Evidence from the Courts," NBER Working Papers 20269, National Bureau of Economic Research, Inc.
    34. 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.
    35. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    36. Hans Gersbach & Maik Schneider & Olivier Schneller, 2013. "Basic research, openness, and convergence," Journal of Economic Growth, Springer, vol. 18(1), pages 33-68, March.
    37. 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.
    38. 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.
    39. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
    40. 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, Oxford University Press, vol. 109(2), pages 367-397.
    41. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
    42. 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.
    43. 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.
    44. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    45. 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.
    46. 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.
    47. 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.
    48. 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.
    49. Elias Dinopoulos & Peter Thompson, 1999. "Scale effects in Schumpeterian models of economic growth," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 157-185.
    50. Angus C. Chu, 2010. "Effects of Patent Policy on Income and Consumption Inequality in a R&D Growth Model," Southern Economic Journal, Southern Economic Association, vol. 77(2), pages 336-350, October.
    51. Alberto Galasso & Mark Schankerman, 2013. "Patents and Cumulative Innovation: Causal Evidence from the Courts," CEP Discussion Papers dp1205, Centre for Economic Performance, LSE.
    52. 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.
    53. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
    54. 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.
    55. 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.
    56. 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.
    57. 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.
    58. 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.
    59. 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.
    60. 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.
    61. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
    62. Dinopoulos, Elias & Thompson, Peter, 1998. "Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-335, December.
    63. Aghion, Philippe & Howitt, Peter, 1996. "Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
    64. 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.
    65. 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)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chu, Angus C. & Cozzi, Guido & Pan, Shiyuan & Zhang, Mengbo, 2016. "Do Stronger Patents Stimulate or Stifle Innovation? The Crucial Role of Financial Development," MPRA Paper 73630, University Library of Munich, Germany.
    2. He, Qichun & Zou, Heng-fu, 2016. "Does inflation cause growth in the reform-era China? Theory and evidence," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 470-484.
    3. Philipp Pfeiffer, 2017. "How much Keynes and how much Schumpeter? An Estimated Macromodel of the US Economy," 2017 Meeting Papers 324, Society for Economic Dynamics.
    4. Cozzi, Guido & Galli, Silvia, 2017. "Should the government protect its basic research?," Economics Letters, Elsevier, vol. 157(C), pages 122-124.
    5. Panebianco, Fabrizio & Verdier, Thierry & Zenou, Yves, 2016. "Innovation, Pricing and Targeting in Networks," CEPR Discussion Papers 11398, C.E.P.R. Discussion Papers.
    6. Niwa, Sumiko, 2016. "Patent claims and economic growth," Economic Modelling, Elsevier, vol. 54(C), pages 377-381.
    7. Chen, Hung-Ju, 2015. "Innovation and imitation: effects of intellectual property rights in a product-cycle model of skills accumulation," MPRA Paper 65745, University Library of Munich, Germany, revised Apr 2015.
    8. repec:kap:compec:v:51:y:2018:i:1:d:10.1007_s10614-016-9597-9 is not listed on IDEAS
    9. Cozzi, Guido & Pataracchia, Beatrice & Pfeiffer, Philipp & Marco, Ratto, 2017. "How much Keynes and how much Schumpeter? An Estimated Macromodel of the US Economy," Working Papers 2017-01, Joint Research Centre, European Commission (Ispra site).
    10. Kunihiko Konishi, 2015. "Basic and Applied Research: A Welfare Analysis," Discussion Papers in Economics and Business 15-08, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    11. Lin, Hwan C. & Shampine, L.F., 2014. "Finite-length Patents and Functional Differential Equations in a Non-scale R&D-based Growth Model," MPRA Paper 61603, University Library of Munich, Germany.
    12. Chu, Angus C. & Shen, Guobing & Zhang, Xun, 2017. "Imports and Intellectual Property Rights on Innovation in China," MPRA Paper 81706, University Library of Munich, Germany.
    13. Furukawa, Yuichi & Lai, Tat-kei & Sato, Kenji, 2017. "Receptivity and Innovation," MPRA Paper 81536, University Library of Munich, Germany.
    14. repec:red:issued:17-109 is not listed on IDEAS
    15. Yibai Yang, 2018. "On the Optimality of IPR Protection with Blocking Patents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 205-230, January.
    16. Prettner, Klaus & Werner, Katharina, 2016. "Why it pays off to pay us well: The impact of basic research on economic growth and welfare," Research Policy, Elsevier, vol. 45(5), pages 1075-1090.
    17. Tatsuro Iwaisako, 2017. "Welfare Effects of Patent Protection in a Semi-Endogenous Growth Model," Discussion Papers in Economics and Business 17-27, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    18. 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.

    More about this item

    Keywords

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

    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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Flockerzi). General contact details of provider: http://edirc.repec.org/data/vwasgch.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.