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WELFARE EFFECTS OF PATENT PROTECTION IN A SEMI-ENDOGENOUS GROWTH MODEL

Published online by Cambridge University Press:  15 May 2018

Tatsuro Iwaisako
Tatsuro Iwaisako*
Affiliation:
Osaka University
*
Address correspondence to: Tatsuro Iwaisako, Graduate School of Economics, Osaka University, 1-7 Machikaneyama, Toyonaka, Osaka560-0043, Japan; e-mail: iwaisako@econ.osaka-u.ac.jp
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Abstract

This paper examines how strengthening patent protection affects welfare in a nonscale quality-ladder model, which was developed by Segerstrom [American Economic Review 88, 1290–1310] and generalized by Li [American Economic Review 93, 1009–1017]. In the Segerstrom–Li model, patent protection creates no distortion in static allocation among the production sectors. In order to examine the welfare effects of strengthening patent protection adequately, we incorporate a competitive outside good into the Segerstrom–Li model. In the general model, we derive the welfare-maximizing degree of patent protection analytically by utilizing a linear approximation of the transition path. The result shows that the welfare-maximizing degree of patent protection is weaker when the market share of the outside good is positive than when it is zero. In other words, disregarding the static distortion that patent protection creates leads to excessive patent protection.

Keywords

R&DPatent ProtectionWelfare AnalysisSemi-Endogenous Growth
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 3 , April 2020 , pp. 708 - 728
Copyright
© Cambridge University Press 2018

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Footnotes

I would like to thank Christophe Deissenberg (associate editor) and two anonymous referees for their helpful comments and suggestions, which have improved this paper significantly, and Hitoshi Tanaka for helpful discussions on an earlier version. I gratefully acknowledge the financial support of Japan Society for the Promotion of Science (JSPS) Grant-in-Aid for Young Scientists (B) (No. 25780134) and JSPS Grant-in-Aid for Scientific Research (No. 16H02026, No. 17K03623). The usual disclaimer applies.

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