Patent Breadth and Patenting of Intermediate Results in Cumulative Innovation Race

The paper discusses the effect of patent breadth an the patenting of intermediate results in a cumulative innovation race. Patent breadth is considered as the licensing rate between the patentee of basic innovation and the subsequent innovatiors. We show that both patent breadth and the strategic first mover advantage due holding the basic innovation secret determine the final market outcomes. Although increasing patent breadth always encourages public disclosure of intermediate results, the effect of patent breadth on social welfare and technological progress shows a quasi inverted U-shape and thus the optimal patent breadth is an innre solution, sharply different to the existing literature, where the optimal breadth is often corner solution

Dynamic Effects of Minimum Wage on Growth and Innovation in a Schumpeterian Economy

We explore the dynamic effects of minimum wage in a Schumpeterian model with endogenous market structure and obtain the following results. First, raising the minimum wage decreases the employment of low-skill workers and increases the unemployment rate. Second, it decreases the level of output. Third, it decreases the transitional growth rate of output but does not affect the steady-state growth rate. Our quantitative analysis shows that the magnitude of the negative effects of minimum wage is sharply increasing in low-skill labor intensity in production and that employed low-skill workers gain initially but might suffer from slower growth in future wages

Multi-Tasking vs. Screening: A Model of Academic Tenure

The paper develops a model of academic tenure based on multi-tasking and screening. A professor has two tasks, researching and teaching. We assume that researching performance is easy to measure but teaching performance is immeasurable. Then Holmtrom and Milgrom's (1991) classical muli-task principal-agent model implies that the only way for the the university to "incentivize" teaching activity is decreasing the incentive power to researching activity. This justifies the low-powered contract to tenured professors. However, with low-powered contract, the university will face serious informational problem in the process of enrollment, either transferring rents to the candidates with low ability if the wage level is high, or suffering from the potential occupational vacancy if the wage level is low. To this dilemma, the up-or-out contract is a possible solution

Multi-Tasking vs. Screening: A Model of Academic Tenure

The paper develops a model of academic tenure based on multi-tasking and screening. A professor has two tasks, researching and teaching. We assume that researching performance is easy to measure but teaching performance is immeasurable. Then Holmtrom and Milgrom's (1991) classical muli-task principal-agent model implies that the only way for the the university to "incentivize" teaching activity is decreasing the incentive power to researching activity. This justifies the low-powered contract to tenured professors. However, with low-powered contract, the university will face serious informational problem in the process of enrollment, either transferring rents to the candidates with low ability if the wage level is high, or suffering from the potential occupational vacancy if the wage level is low. To this dilemma, the up-or-out contract is a possible solution

Class Struggle in a Schumpeterian Economy

This study explores the conflict of interests between workers and capitalists in a Schumpeterian economy. We consider the limit on the market power of monopolistic firms as a policy instrument and derive its optimal levels for workers and capitalists, respectively. Because monopolistic profit provides incentives for innovation, workers may prefer monopolistic firms to have some market power, but they prefer less powerful monopolistic firms than capitalists. Workers' preferred level of monopolistic power is decreasing in their discount rate and increasing in innovation productivity and the quality step size. Capitalists' preferred level of monopolistic power is increasing in the quality step size. We use the difference in levels preferred by workers and capitalists to measure the severity of their conflict of interests, which becomes less severe when workers' discount rate falls or innovation productivity rises. Finally, at a small (large) quality step size, enlarging the step size mitigates (worsens) their conflict

Effects of Patents on the Industrial Revolution

This study provides a growth-theoretic analysis on the effects of intellectual property rights on the endogenous takeoff of an economy. We incorporate patent protection into a Schumpeterian growth model in which takeoff occurs when the population size crosses an endogenous threshold. We find that strengthening patent protection has contrasting effects on economic growth at different stages of the economy. Specifically, it leads to an earlier takeoff (i.e., an earlier industrial revolution) but also reduces economic growth in the long run

An Economic Analysis of Political Meritocracy

The political system in China is often referred to as political meritocracy. This study develops a simple model of political meritocracy that captures democracy and dictatorship as special cases. Then, we use the model to explore the strengths and weaknesses of a meritocratic system relative to a democratic system. We find that political meritocrats would choose economic policies that are more conducive to economic activities and lead to higher income but less public goods. Whether the meritocratic or democratic equilibrium achieves higher social welfare depends on the distribution of individuals' abilities. If the median voter's ability is lower than the mean of the population, then the meritocratic equilibrium can achieve higher social welfare than the democratic equilibrium. Also, there is a threshold degree of political inclusiveness in the meritocratic system above which political meritocracy dominates democracy in social welfare, and this threshold degree is increasing in the median voter's ability

Effects of patents on the transition from stagnation to growth

AbstractThis study provides a growth-theoretic analysis of the effects of intellectual property rights on the take-off of an economy from an era of stagnation to a state of sustained economic growth. We incorporate patent protection into a Schumpeterian growth model in which take-off occurs when the population size crosses an endogenous threshold. We find that strengthening patent protection has contrasting effects on economic growth at different stages of development. Specifically, it leads to an earlier take-off but also reduces economic growth in the long run.</jats:p