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Optimal patent breadth in a horizontal innovation growth model

Author

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  • Reinan Ribeiro
  • David Turchick

Abstract

Patenting and licensing are introduced into the lab-equipment horizontal innovation model of endogenous growth. Patent length is not deterministic, in that patent holders' market power will collapse if and only if their patented goods get successfully imitated. The model is solved in an exact fashion. Consideration of static and dynamic inefficiencies shows that optimal intellectual property rights protection entails maximal patent length, but nonmaximal patent breadth. By fixing a lower patent breadth level, government is able to trade off a modest negative long-term effect on growth for a substantial positive short-term effect on consumption. A third potential source of inefficiency, reputational, is also considered.

Suggested Citation

  • Reinan Ribeiro & David Turchick, 2014. "Optimal patent breadth in a horizontal innovation growth model," Working Papers, Department of Economics 2014_15, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2014wpecon15
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    References listed on IDEAS

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    More about this item

    Keywords

    intellectual property rights; horizontal innovation; lab-equipment model; growth; patent length; patent breadth.;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • 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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