International Intellectual Property Rights Protection and Rate of Product Innovation

The main purpose of the paper is to examine the impact of intellectual property rights (hereinafter IPR) protection on economic growth and welfare. To achieve this aim, we make use of an expanding-variety type R&D-based endogenous growth model. We work out the transitional dynamics of a shock in IPR protection and account fully for the loss in current consumption and gain in consumption growth due to a tightening IPR protection. We find that there exists an optimal degree of IPR protection in our model. We then calibrate our model by US data, and found that under-protection of IPR is much more likely than over-protection. Moreover, in the case of over-protection, the welfare losses are trivial; whereas in the case of under-protection, the welfare losses can be substantial