Returns to Inventors

48 Pages Posted: 17 Mar 2010

See all articles by Otto Toivanen

Otto Toivanen

Aalto University - Department of Economics; KU Leuven - Faculty of Business and Economics (FBE); CEPR; Helsinki Center of Economic Research (HECER)

Lotta Väänänen

Compass Lexecon

Multiple version iconThere are 2 versions of this paper

Date Written: March 2010


A key input to inventive activity is human capital. Hence it is important to understand the monetary incentives of inventors. We estimate the effect of patented inventions on individual earnings by linking data on U.S. patents and their inventors to Finnish employer-employee data. Returns are heterogeneous: Inventors get a temporary reward of 3% of annual earnings for a patent grant and for highly-cited patents a longer-lasting premium of 30% in earnings three years later. Similar medium-term premia accrue to inventors who initially hold the patent rights, although they forego earnings at the time of the grant.

Keywords: citations, effort, incentives, intellectual property, inventors, patents, performance pay, return, wages

JEL Classification: J31, O31

Suggested Citation

Toivanen, Otto and Väänänen, Lotta, Returns to Inventors (March 2010). CEPR Discussion Paper No. DP7744, Available at SSRN:

Otto Toivanen (Contact Author)

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki

KU Leuven - Faculty of Business and Economics (FBE) ( email )

Naamsestraat 69
Leuven, B-3000

CEPR ( email )

United Kingdom

Helsinki Center of Economic Research (HECER)

FI-00014 Helsinki

Lotta Väänänen

Compass Lexecon ( email )

United States

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