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Patent Length and the Rate of Innovation

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  • Horowitz, Andrew W
  • Lai, Edwin L-C

Abstract

This paper models the effect of patent length on the rate-of-innovation and consumer welfare. The authors find that the patent length that maximizes the rate-of-innovation exceeds that which maximizes consumer welfare. They show a countervailing effect of patent length upon the 'size' and 'frequency' of innovation. Longer patents increase the size, but decrease the frequency of innovation. The patent lengths that maximize the rate-of-innovation and welfare represent balance points between size and frequency. The divergence of the welfare maximizing and rate-of-innovation maximizing patent lengths has important policy implications that the authors briefly explore. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Horowitz, Andrew W & Lai, Edwin L-C, 1996. "Patent Length and the Rate of Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 785-801, November.
    • Handle: RePEc:ier:iecrev:v:37:y:1996:i:4:p:785-801
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