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Patent protection, capital accumulation, and economic growth

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Abstract

In this paper, we investigate how strengthening patent protection affects economic growth in an endogenous growth model where both innovation and capital accumulation are the driving forces of economic growth. In this model, stronger patent protection raises the profit flow obtained by innovation but reduces the factor demand for capital. This process accelerates innovation but discourages capital accumulation, and because of the negative effect on economic growth through reducing capital accumulation, strengthening patent protection may then impede economic growth. This result contrasts with earlier studies where innovation is the sole driving force for economic growth. Moreover, in an open economy model where technologies are transferred and capital is imported from abroad, the strictest protection of patents enhances technology adoption from abroad but impedes capital accumulation, and thus, the relation derived between patent protection and output can be nonmonotone. In terms of implications, these findings may be able to partly explain the complex relation found by some empirical studies in this area.

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Authors and Affiliations

  1. Graduate School of Economics, Osaka University, Machikaneyama, Toyonaka, Osaka, 560-0043, Japan

    Tatsuro Iwaisako & Koichi Futagami

Authors
  1. Tatsuro Iwaisako
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  2. Koichi Futagami
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Correspondence to Tatsuro Iwaisako.

Additional information

We are especially grateful to the coeditor, Professor Timothy Kehoe, and two anonymous referees for constructive remarks and advice on an earlier version of this paper. We would also like to thank Elias Dinopoulos, Daiji Kawaguchi, Noritaka Kudoh, Takashi Maeda, Kazuo Mino, Yoshiyasu Ono, Makoto Saito, Kenichi Sakakibara, Paul S. Segerstrom, Yoshimasa Shirai, Katsuya Takii, Masatoshi Tsumagari, participants at the Spring 2004 JEA annual meeting, and seminar participants at Hitotsubashi University, Kanazawa University, Keio University, Kobe University, Osaka University, and Ritsumeikan University for helpful comments and suggestions. Iwaisako acknowledges the financial support of Grants-in-Aid for Young Scientists (B) (No.16730104, 18730136, 20730138) from the Ministry of Education, Culture, Sports, Science, and Technology, Japan.

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Iwaisako, T., Futagami, K. Patent protection, capital accumulation, and economic growth. Econ Theory 52, 631–668 (2013). https://doi.org/10.1007/s00199-011-0658-y

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