Patent, Inequality and Innovation-Driven Growth

Ozan Hatipoglu

MPRA Paper from University Library of Munich, Germany

Abstract: When people have hierarchic preferences inequality affects innovation-driven growth through the implied demand distribution over new goods. The paper examines the demand path of the firm through its life-cycle and analyzes the efficiency of dynamic resource allocation under different inequality scenarios. Unlike previous models of inequality and demand induced innovation, the innovators are protected by patents of finite length. Longer patents increase the profitability of an innovation because they reduce the effect of inequality by increasing the likelihood that the firms benefit from a future demand jump in sales to the poor. This result does not hold, however, when initial inequality is low or the purchasing power of the poor is high. Moreover, reducing inequality does not increase growth as long as the amount of redistribution is below a threshold level.

Keywords: innovation dynamics; finite patents; hierarchic preferences; wealth inequality (search for similar items in EconPapers)
JEL-codes: O14 O15 O31 (search for similar items in EconPapers)
Date: 2008-03-20
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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