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Sequential R&D and Blocking Patents in the Dynamics of Growth

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  • Guido Cozzi

    (Durham Business School)

  • Silvia Galli

    (Hull University Business School)

Abstract

The incentives to conduct basic or applied research play a central role for economic growth. How does increasing early innovation appropriability affect basic research, applied research, education, and wage inequality? This paper analyzes the macroeconomic effects of patent protection by incorporating a two-stage cumulative innovation structure into a quality-ladder growth model with skill acquisition. We focus on two issues (a) the over-protection vs. the under-protection of intellectual property rights in basic research; (b) the evolution of jurisprudence shaping the bargaining power of the upstream innovators. We show that the dynamic general equilibrium interations may seriously mislead the empirical assessment of the growth effects of IPR policy: stronger protection of upstream innovation always looks bad in the short- and possibly medium-run. We argue that in a common law system an explictly dynamic macroeconomic analysis is appropriate. We also provide a simple "rule of thumb" indicator of the basic researcher bargaining power.

Suggested Citation

  • Guido Cozzi & Silvia Galli, 2012. "Sequential R&D and Blocking Patents in the Dynamics of Growth," Department of Economics Working Papers 2012_02, Durham University, Department of Economics.
    • Handle: RePEc:dur:durham:2012_02
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    More about this item

    Keywords

    Endogenous Growth; Basic and Applied R&D; Endogenous Technological Change; Common Law;
    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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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