Research

Working Papers

Time-consistent patent policy with creative destruction, with Jonathan Goldberg and David Lopez-Salido

We develop a Schumpeterian endogenous growth model in which firms innovate strategically and the government cannot commit to patent policy. Strategic innovation gives rise to a novel channel ameliorating patent policy’s time-consistency problem: By fostering competition through creative destruction, a government today induces future governments to choose stronger patent protection. Nonetheless, in a calibrated version of our model, patent protection is weaker under discretion than under commitment. We study transitional dynamics following the adoption of commitment policy: Productivity over the subsequent two decades is only modestly higher than under time-consistent policy, but the welfare gain is notable.

Status: Submitted