DP1951 Patents in a Model of Endogenous Growth

Author(s): Edward O'Donoghue , Josef Zweimüller

Publication Date: August 1998

Keyword(s): Innovation , intellectual property , patent design , patent policy

JEL(s): O31 , O34 , O38

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP1951.asp

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This paper examines patent protection in an endogenous-growth model. Our aim is two-fold. First, we show how the patent policies discussed by the recent patent-design literature can influence R&D in the endogenous-growth framework, where the role of patents has been largely ignored. Second, we explore how the general-equilibrium framework contributes to the results of the patent-design literature. In a general-equilibrium model, both incentives to innovate and monopoly distortions depend on the proportion of industries that conduct R&D. Furthermore, patents affect the allocation of R&D resources across industries, and patents can distort resources away from industries where they are most productive.