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Patent protection, capital accumulation, and economic growth

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  • Tatsuro Iwaisako
  • Koichi Futagami

Abstract

In this paper, we investigate how strengthening patent protection affects economic growth in an endogenous growth model where both innovation and capital accumulation are the driving forces of economic growth. In this model, stronger patent protection raises the profit flow obtained by innovation but reduces the factor demand for capital. This process accelerates innovation but discourages capital accumulation, and because of the negative effect on economic growth through reducing capital accumulation, strengthening patent protection may then impede economic growth. This result contrasts with earlier studies where innovation is the sole driving force for economic growth. Moreover, in an open economy model where technologies are transferred and capital is imported from abroad, the strictest protection of patents enhances technology adoption from abroad but impedes capital accumulation, and thus, the relation derived between patent protection and output can be nonmonotone. In terms of implications, these findings may be able to partly explain the complex relation found by some empirical studies in this area. Copyright Springer-Verlag 2013

Suggested Citation

  • Tatsuro Iwaisako & Koichi Futagami, 2013. "Patent protection, capital accumulation, and economic growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 52(2), pages 631-668, March.
    • Handle: RePEc:spr:joecth:v:52:y:2013:i:2:p:631-668
    DOI: 10.1007/s00199-011-0658-y
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    More about this item

    Keywords

    Patent policy; Endogenous growth; Innovation; Capital accumulation; O31; O34; O41;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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