69 Pages Posted: 8 May 2010
Date Written: December 2, 2009
Within the context of an endogenous growth model with nonhomothetic preferences and income distribution, this paper analyzes whether there might be disagreement between rich and poor consumers about the optimal patent policy. In equilibrium, the poor and the rich differ with respect to the share of differentiated goods that they consume and an increase in the length of patents increases the rate of growth and reduces current consumption of the poor more than that of the rich. Consequently, the poor like shorter patents or patents that are enforced with a lower probability. For given innovation incentives the poor prefer short and broad patents while the rich prefer long and narrow patents. Infinitely lived patents are optimal if the rich can compensate the poor with transfer payments.
Keywords: patent policy, inequality, growth, nonhomothetic preferences
JEL Classification: O34, D30, L16, O43
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