Published online by Cambridge University Press: 13 December 2016
We construct a growth model with status preference to explore the effects of patents on innovation and social welfare. We find a nonmonotonic effect of patent protection on innovation. Additionally, the growth-rate-maximizing degree of patent protection decreases when the strength of status preference is larger. The effect of patent protection on social welfare is ambiguous, depending on the strength of status preference. Moreover, wealth inequality widens as patent protection is reinforced. Finally, by using cross-section regression analysis, we document that a nonmonotonic relationship between patent protection and economic growth is statistically significant and that the growth-rate-maximizing degree of patent protection decreases with the strength of status preference.
The authors would like to thank the associate editor and two anonymous referees for their helpful comments and suggestions. S. Pan acknowledges financial support from the Key Project of the National Social Science Foundation of China (No. 15AJY003), the Program for New Century Excellent Talents in University (No. NCET-0453) and the Project of the Scientific Research Foundation for the Returned Overseas Chinese Scholars of Ministry of Education of China. Zhang acknowledges financial support from the State Scholarship Fund of China Scholarship Council. The usual disclaimer applies.