Endogenous Growth Without Patents
53 Pages Posted: 1 May 2017
Date Written: January 30, 2016
This paper constructs an analytically tractable model of endogenous innovation with a special focus on the effects of barriers to entry, namely patents. Conventional models of endogenous growth rely on the existence and enforcement of intellectual property rights with patents. Those legal rights are seen as necessary evils, required to encourage innovation by ensuring successful innovators are rewarded with monopoly rents. This paper takes a different approach. By integrating Aghion, Harris, and Vickers (1997) and the Boldrin and Levine (2003) framework into a conventional vintage capital growth model such as Greenwood, et al (1997), the paper characterizes economic conditions under which patents may decrease the growth rate. The model is calibrated to the US economy to match its long run time series of GDP per hour. Simulations of that calibrated model provide important insights regarding growth-promoting policies. The model also provides an explicit numerical algorithm to measure cross-country differences in total factor productivity due to barriers to technology adoption.
Keywords: Embodied Technology, Monopoly Rents from Innovation, Cost of Copying and Cost of Patents
JEL Classification: E23, E69, O34, L16, L51
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