Abstract

This paper analyzes how the effect of intellectual property rights (IPRs) on innovation depends on the distribution of innovation rents across the population. This is done in a product-variety growth model with non-homothetic preferences and endogenous markups in which richer households consume a larger variety of goods than poorer ones. Innovation rents emerge because there are inframarginal superstar innovators who generate more valuable innovations than the marginal innovators do. It is shown that increasing IPR protection increases growth when innovation rents are widely distributed across the population but that it can reduce growth when innovation rents accrue to a minority of rich superstar innovators. The mechanism in the latter case is the following: an increase in IPR protection increases the rents of superstar innovators and therefore inequality, which reduces mass-demand for innovative goods and the incentives to innovate.

Christian Kiedaisch is working at the Faculty of Economics, Social Sciences and Business Administration at the University of Namur (as “chargé de cours”). He obtained his Ph.D. from the Toulouse School of Economics and was a Postdoc in Zurich (at both UZH and ETH) before going to Namur.

Christian’s research deals with issues related to intellectual property rights, endogenous growth, inequality and consumer demand. One focus lies on the effects of IPRs on cumulative innovation and growth, and another one on interactions between the distribution of income and wealth, the demand for different kinds of goods, IPRs, and (green) innovations. While his main focus is theoretical, he is also involved in related empirical projects studying patent and consumption data.