Abstract
Protection of intellectual property rights is an important global economic issue. This paper examines the relationship between protection of intellectual property rights and economic growth in the framework of an endogenous growth model with product innovation determined by profit maximizing innovators. In this paper, we focus on the role of patent protection in long-term economic growth.
In general, conventional literatures of R&D based models of economic growth adopt a common hypothesis regarding patent systems : that patents are infinitely lived ; however, in reality this hypothesis is evidently not verified. This paper modifies the model of Jones (Journal of Political Economy, 1995, vol. 103, no. 4) and shows how the implications of the model vary in a framework of finite patent length. Our theoretical investigation shows that the implications from our model differ greatly from those of the Jones model. For example, even though the duplication parameter is sufficiently large, a decentralized economy can generate overinvestment in R&D. On the other hand, if the parameter of duplication is small, then a decentralized economy suggests underinvestment in R&D, for all parameter values of knowledge externalities.
JEL classification : O30, O34, O41
