PATENT LENGTH AND PRICE REGULATION IN AN R&D GROWTH MODEL WITH MONOPOLISTIC COMPETITION

Jinli Zeng, Jie Zhang and Michael Ka-Yiu Fung

Macroeconomic Dynamics, 2014, vol. 18, issue 1, 1-22

Abstract: This paper considers the effects of patent length and price regulation in an R&D growth model with variety expansion. Innovation requires lower bounds on patent length and price. Increasing patent duration promotes growth; increasing the cap on the price of patented products promotes growth below the monopoly-pricing level. Each policy instrument can raise welfare unless excessively used, and their welfare ranking depends on parameterizations. It is desirable, on welfare grounds, to limit patent protection along both dimensions, namely by limiting patent length and capping the price of patented products. Such limits raise welfare despite reducing the growth rate.

Date: 2014
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