INTELLECTUAL PROPERTY RIGHTS, INSTITUTIONAL QUALITY AND ECONOMIC GROWTH

We consider intellectual property rights (IPRs) in a Schumpeterian growth model in which patent holders face the threats of profit loss due to imitation and complete valuation loss due to outside innovation. We disaggregate IPR policies by distinguishing between the quality of the IPR regime and the intensity of IPR enforcement. An increase in the quality of the IPR regime unambiguously promotes growth. However, the relationship between IPR enforcement intensity and growth follows an inverted U-shaped curve. The growth-maximizing intensity of IPR enforcement is decreasing in institutional quality. We also investigate the model's welfare implications and examine the economy under a no-growth equilibrium.