Does intellectual monopoly stimulate or stifle innovation?

Item Type Journal paper
Abstract This study develops an R&D-based growth model with vertical and horizontal innovation to shed some light on the current debate on whether patent protection stimulates or stifles innovation. We analyze the effects of patent protection in the form of blocking patents. We show that patent protection changes the direction of innovation by having asymmetric effects on vertical innovation (i.e., quality improvement) and horizontal innovation (i.e., variety expansion). Calibrating the model and simulating transition dynamics, we find that strengthening the effect of blocking patents stifles vertical innovation and decreases economic growth but increases social welfare due to an increase in horizontal innovation. In light of this finding, we argue that in order to properly analyze the growth and welfare implications of patents, it is important to consider their often neglected compositional effects on vertical and horizontal innovation. --------------------------------------------------------------------------------
Authors Cozzi, Guido; Chu, Angus & Galli, Silvia
Journal or Publication Title European Economic Review
Language English
Keywords Economic growth, innovation, intellectual property rights
Subjects economics
HSG Classification contribution to scientific community
HSG Profile Area SEPS - Economic Policy
Refereed Yes
Date May 2012
Publisher Elsevier
Place of Publication Amsterdam
Volume 56
Number 04
Page Range 727-746
Number of Pages 20
ISSN 0014-2921
ISSN-Digital 1873-572X
Publisher DOI
Depositing User Prof. PhD Guido Cozzi
Date Deposited 12 Apr 2013 11:17
Last Modified 08 Feb 2023 01:21


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Cozzi, Guido; Chu, Angus & Galli, Silvia (2012) Does intellectual monopoly stimulate or stifle innovation? European Economic Review, 56 (04). 727-746. ISSN 0014-2921

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