Discussion Paper
No. 2016-51 |
December 15, 2016
Patent Buyout in a Model of Endogenous Growth
Abstract
This paper considers the prospect of a government patent buyout in a model of endogenous growth. To this end, the author modifies a standard quality ladder growth model by incorporating possibility of imitation, and rent protection activities (RPAs) by the innovator. The government finances the buyout by imposing a per unit sales-tax on the goods. The author shows that in this set-up, patent buyout by the government can lead to higher level of welfare without lowering an economy's growth rate along the balanced path. He highlights two sources of welfare improvement: elimination of monopoly pricing, and reduction in RPAs.
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