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Optimal Patent Protection in a Two-Sector Economy

Jacques Olivier () and Ai Ting Goh
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Jacques Olivier: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article addresses the issue of optimal patent protection in an economy with a downstream and an upstream sector. The key insight is that higher patent protection in the downstream sector raises the incentives of agents to do R&D in that sector but discourages innovation in the upstream sector because of a market size effect. Hence, higher patent protection in the upstream sector accelerates growth whereas higher patent protection in the downstream sector slows it down. If some innovation is socially desirable, optimal patent protection is necessarily higher in the upstream than in the downstream sector.

Keywords: Patent Protection; Two-Sector Economy (search for similar items in EconPapers)
Date: 2002-11
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Published in International Economic Review, Wiley, 2002, Vol.43,n°4, pp.1191-1214. ⟨10.1111/1468-2354.t01-1-00053⟩

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DOI: 10.1111/1468-2354.t01-1-00053

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