Dynamics of Human Capital Accumulation, IPR Policy, and Growth

Bharat Diwakar and Gilad Sorek

No auwp2016-11, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: We study the effect of IPR (Intellectual Property Rights) policy on growth, in a closed overlapping-generations economy, which undergoes transitional development phase of human capital accumulation. We show that the growth-maximizing policy is stage-dependent: in the early development phase, during which innovation cost is high relative to worker productivity, weak IPR protection can expedite economic growth and may be necessary to escape long run stagnation. Weaker IPR protection erodes monopolistic deadweight loss and, thereby, increases aggregate output and saving. However, it also shifts investment away from R&D activity towards the formation of physical capital. We show that the former (positive) effect is dominant during the early development phase. However, as human capital is further accumulated, and labor productivity correspondingly increases, economic growth is maximized with stronger IPR protection.

Keywords: Stage-Dependent IPR; OLG; Human Capital; Development and Growth (search for similar items in EconPapers)
JEL-codes: O31 O34 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-dge, nep-gro, nep-ino, nep-ipr and nep-knm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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