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WELFARE EFFECTS OF PATENT PROTECTION IN A GROWTH MODEL WITH R&D AND CAPITAL ACCUMULATION

Published online by Cambridge University Press:  21 May 2019

Yibai Yang
Yibai Yang*
Affiliation:
University of Macau
*
Address correspondence to: Yibai Yang, E21, Humanities and Social Sciences Building, Department of Economics, University of Macau, Avenida da Universidade, Taipa, Macao, China. e-mail: [email protected]. Phone:+(853) 88228917. Fax:+(853) 88222339
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Abstract

This study explores the welfare effects of patent protection in a Romer-type expanding variety model in which R&D and capital accumulation are both engines of growth. It shows that the comparison between the productivity of R&D and that of capital plays an important role in the welfare analysis. When the relative productivity of R&D compared to capital is high (low), social welfare takes an inverted-U shape for (is decreasing in) the strength of patent protection, and the welfare-maximizing degree of patent protection is no greater than (identical to) the growth-maximizing degree. Moreover, the model is calibrated to the US economy and the numerical results support these welfare implications.

Keywords

Economic GrowthPatent ProtectionR&DCapital Accumulation
Type
Articles
Information
Macroeconomic Dynamics , Volume 25 , Issue 2 , March 2021 , pp. 579 - 602
Copyright
© Cambridge University Press 2019

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Footnotes

The author is indebted to the editor (William A. Barnett), an associate editor, and two anonymous referees for their helpful comments and generous suggestions. The author thanks Zhao Chen, Angus Chu, Wai-Hong Ho, Chien-Yu Huang, Yuelin Liu, Yulei Peng, Pietro Peretto, Zhao Rong, Guang-Zhen Sun, Jianfeng Wu, Mingli Zheng, and seminar participants at University of Macau, Sun Yat-sen University, Fudan University, and NAU-IUD Innovation Economics Workshop for the useful discussion and feedback. The author also gratefully acknowledges the support given by the Start-up Research Grant of University of Macau and the hospitality provided by Academia Sinica where part of the research was completed.

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