A note on the effect of patents in endogenous growth models

ABSTRACT

This note examines the effect of patent protection in an endogenous growth model with a generic innovation process. It indicates that increasing patent breadth stimulates innovation when R&D is less intermediates-intensive than production, whereas it has a non-monotonic effect on innovation when the former is more intermediates-intensive than the latter.

KEYWORDS:

• Patent protection
• intermediates-intensive
• innovation
• endogenous growth

JEL CLASSIFICATION:

• O31
• O34
• O40

Acknowledgement

The author would like to thank the anonymous referee for helpful comments and suggestions, and acknowledge financial support from the Key Project of the National Social Science Foundation of China (No. 15AJY003). The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ The innovation process is referred to as knowledge-driven if labour and the existing knowledge is the input in the innovation process, while it is referred to as lab-equipment-driven if the final good is the only input in the innovation process. See Rivera-Batiz and Romer (1991) for the description of lab-equipment and knowledge-driven innovation specification.

² Recently, Qian (2007) claimed that the effect of patent protection on innovation is non-monotonic.

³ Here, labour can be interpreted as human capital.

⁴ It implicitly assumes that capital depreciates fully after use.

⁵ It is necessary to note that patent protection lowers the wage rate, thereby decreasing the innovation value when at equilibrium.

Additional information

Funding

The author would like to acknowledge financial support from the Key Project of the National Social Science Foundation of China [No. 15AJY003].