Patent protection and income inequality in a model with two growth engines

Ruiyang Hu, Yibai Yang and Zhijie Zheng

Economic Modelling, 2023, vol. 123, issue C

Abstract: Recent evidence suggests that the degrees of both patent protection and income inequality have increased significantly. Existing literature mainly analyzes the patent-inequality relationship in a growth-theoretic framework with a sole growth engine. This study explores the effect of patent policy on income inequality in a variety-expansion model, in which R&D and capital accumulation are non-complementary engines of growth. We find that patent protection affects income inequality only through the interest-rate channel, which depends on the magnitude of R&D productivity relative to capital productivity. If R&D productivity relative to capital is high (low), stronger patent protection intensifies (mitigates) income inequality. Moreover, we calibrate the model to the US economy, and the numerical results support the implications of patent protection on economic growth and income inequality. This result is consistent with our empirical findings using cross-country panel data on OECD countries.

Keywords: Capital accumulation; Economic growth; Income inequality; Patent protection; R&D (search for similar items in EconPapers)
JEL-codes: D30 O31 O34 O40 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:123:y:2023:i:c:s0264999323000925

DOI: 10.1016/j.econmod.2023.106280

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