Effects of Intellectual Property Rights Protection and Integration on Economic Growth and Welfare

Abstract

The protection of intellectual property rights (IPR) and the distribution of rent are central issues in R&D-based growth models with the return to innovation serving as the engine of growth. In this paper we consider the strength of the intellectual property rights and franchise bargaining system to analyze how the rent/franchise fee and institutional quality affect the economic growth and social welfare. It is found that the intermediate goods firm with imperfect IPR protection charges less than the marginal cost. In addition, increasing the IPR protection will increase the rent/franchise fee. We also show that the growth-maximizing effects of IPR protection, the bargaining power of intermediate goods firms, and the imitation of technology are no longer equivalent to those effects on welfare maximization since the welfare result depends on the relative degrees of the growth enhancing effect and crowding-out effect on consumption.