Patents and Welfare in an Evolutionary Model
Patents and Welfare in an Evolutionary Model
This chapter inquires into the role of patents and the appropriate duration of patent protection with regard to defining property rights in productive knowledge. Utilizing the formal model of inventive opportunity drawn from Nelson and Winter (1982), the chapter argues that R&D performed higher on average without patents, and best practice productivity levels tended to be higher without patents. Such simulation results suggest that the patent system can be counterproductive from a social welfare point of view. Indeed, from the perspective of industry evolution, patents may have adverse effects on industry structure and output. Granted these and other shortcomings indicating that the desirability of stronger intellectual property protection is far from axiomatic, the chapter calls for more nuanced approaches toward the modelling of technological opportunity.
Keywords: patents, knowledge diffusion, evolutionary models, intellectual property diffusion, technological opportunity
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