Abstract
This paper considers the prospect of a government patent buyout in a model of endogenous growth. To this end, I modify a standard quality ladder growth model by incorporating possibility of imitation, and rent protection activities (RPAs) by the innovator. The government finances the buyout by imposing a per unit sales-tax on the goods. I show that in this set-up, patent buyout by the government can lead to higher level of welfare without lowering an economy's growth rate along the balanced path. I highlight two sources of welfare improvement - elimination of monopoly pricing, and reduction in RPAs.
Highlights
There is a wide consensus amongst economists that long run economic growth is driven by sustained technological progress resulting from R&D investment by firms (Romer (1986, 1990), Grossman and Helpman(1991), and Aghion and Howitt (1992))
The list includes elimination of patents on federally subsidized research and instead making such research available to all market participants. This paper considers another possibility of reforming the patent system in the form of patent buyouts
Dinopolous and Syropolous (2007), Sener (2008), and Davis and Sener (2013) develop endogenous growth models where innovators do not passively stand-by waiting for other innovators or imitators to infringe upon their monopoly; instead they undertake substantial expenditure to ensure that their Intellectual Property Rights (IPR) are safe
Summary
There is a wide consensus amongst economists that long run economic growth is driven by sustained technological progress resulting from R&D investment by firms (Romer (1986, 1990), Grossman and Helpman(1991), and Aghion and Howitt (1992)). Dinopolous and Syropolous (2007), Sener (2008), and Davis and Sener (2013) develop endogenous growth models where innovators do not passively stand-by waiting for other innovators or imitators to infringe upon their monopoly; instead they undertake substantial expenditure to ensure that their IPRs are safe. As mentioned above, these expenditures may take the form expensive patent litigation, or other expenses such as obtaining sleeping patents. The model closely follows the quality ladders framework in Grossman and Helpman (1991a) and Segerstorm (2007)
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