Optimal patent policy and wealth inequality in a Schumpeterian economy

Angus Chu and Chih-Hsing Liao

Journal of Macroeconomics, 2025, vol. 83, issue C

Abstract: Does wealth inequality affect optimal patent policy? This study develops a Schumpeterian growth model with heterogeneous households to explore this question. Our model features a general innovation specification that nests two common specifications: (a) the knowledge-driven specification that uses R&D labor, and (b) the lab-equipment specification that uses final output for R&D. Under the knowledge-driven specification, all households prefer the same level of patent protection. However, under the lab-equipment specification, less wealthy households prefer weaker patent protection, so an unequal distribution of wealth reduces optimal patent protection and economic growth. Under the general innovation specification, strengthening patent protection has an inverted-U effect on innovation, in contrast to the positive effect under the two special cases. More importantly, an unequal wealth distribution continues to reduce optimal patent protection. Calibrating the model to US data, we find that eliminating wealth inequality raises economic growth by about 0.5% via stronger patent protection.

Keywords: Patent policy; Innovation; Wealth inequality; Economic growth (search for similar items in EconPapers)
JEL-codes: O30 O40 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070424000703
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Optimal Patent Policy and Wealth Inequality in a Schumpeterian Economy (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:83:y:2025:i:c:s0164070424000703

DOI: 10.1016/j.jmacro.2024.103656

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().