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Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 303 Abstract:
We construct a competitive model of innovation and growth under constant returns to scale. Previous models of growth under constant returns cannot model technological innovation. Current models of endogenous innovation rely on the interplay between increasing returns and monopolistic markets. In fact, established wisdom claims monopoly power to be instrumental for innovation and sees the nonrivalrous nature of ideas as a natural conduit to increasing returns. The results here challenge the positive description of previous models and the normative conclusion that monopoly through copyright and patent is socially beneficial.
Palavra-chave: Innovation, Monopoly power, and Endogenous technological change Sujeito: O11 - Macroeconomic Analyses of Economic Development, O34 - Intellectual Property and Intellectual Capital, D62 - Externalities, L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices, O33 - Technological Change: Choices and Consequences; Diffusion Processes, and O31 - Innovation and Invention: Processes and Incentives
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 339 Abstract:
In the modern theory of growth, monopoly plays a crucial role both as a cause and an effect of innovation. Innovative firms, it is argued, would have insufficient incentive to innovate should the prospect of monopoly power not be present. This theme of monopoly runs throughout the theory of growth, international trade, and industrial organization. We argue that monopoly is neither needed for, nor a necessary consequence of, innovation. In particular, intellectual property is not necessary for, and may hurt more than help, innovation and growth. We argue that, as a practical matter, it is more likely to hurt.
Palavra-chave: Innovation, Capital Accumulation, Trade, Intellectual Property, and Growth Sujeito: O47 - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence, F11 - Neoclassical Models of Trade, O34 - Intellectual Property and Intellectual Capital, L11 - Production, Pricing, and Market Structure; Size Distribution of Firms, L43 - Legal Monopolies and Regulation or Deregulation, and O31 - Innovation and Invention: Processes and Incentives
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 347 Abstract:
Innovations and their adoption are the keys to growth and development. Innovations are less socially useful, but more profitable for the innovator, when they are adopted slowly and the innovator remains a monopolist. For this reason, rent-seeking, both public and private, plays an important role in determining the social usefulness of innovations. This paper examines the political economy of intellectual property, analyzing the trade-off between private and public rent-seeking. While it is true in principle that public rent-seeking may be a substitute for private rent-seeking, it is not true that this results always either in less private rent-seeking or in a welfare improvement. When the public sector itself is selfish and behaves rationally, we may experience the worst of public and private rent-seeking together.
Palavra-chave: Innovation, Intellectual property, Trade secrecy, Patent, and Rent seeking Sujeito: D62 - Externalities and D42 - Market Structure, Pricing, and Design: Monopoly
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 357 Abstract:
Innovation and the adoption of new ideas are fundamental to economic progress. Here we examine the underlying economics of the market for ideas. From a positive perspective, we examine how such markets function with and without government intervention. From a normative perspective, we examine the pitfalls of existing institutions, and how they might be improved. We highlight recent research by ourselves and others challenging the notion that government awards of monopoly through patents and copyright are “the way” to provide appropriate incentives for innovation.
Creator: Boldrin, Michele and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 360 Abstract:
Intellectual property protection involves a trade-off between the undesirability of monopoly and the desirable encouragement of creation and innovation. As the scale of the market increases, due either to economic and population growth or to the expansion of trade through treaties such as the World Trade Organization, this trade-off changes. We show that, generally speaking, the socially optimal amount of protection decreases as the scale of the market increases. We also provide simple empirical estimates of how much it should decrease.
Palavra-chave: Monopoly, Innovation, Harmonization, Intellectual Property, and International Trade
Creator: Kehoe, Timothy Jerome, 1953- and Levine, David K. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 380 Abstract:
Typical models of bankruptcy and collateral rely on incomplete asset markets. In fact, bankruptcy and collateral add contingencies to asset markets. In some models, these contingencies can be used by consumers to achieve the same equilibrium allocations as in models with complete markets. In particular, the equilibrium allocation in the debt constrained model of Kehoe and Levine (2001) can be implemented in a model with bankruptcy and collateral. The equilibrium allocation is constrained efficient. Bankruptcy occurs when consumers receive low income shocks. The implementation of the debt constrained allocation in a model with bankruptcy and collateral is fragile in the sense of Leijonhufvud’s “corridor of stability,” however: If the environment changes, the equilibrium allocation is no longer constrained efficient.
Sujeito: D50 - General Equilibrium and Disequilibrium: General, D61 - Allocative Efficiency; Cost-Benefit Analysis, D52 - Incomplete Markets, and G13 - Contingent Pricing; Futures Pricing; option pricing
Creator: Holmes, Thomas J., Levine, David K., and Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 402 Abstract:
Arrow (1962) argued that since a monopoly restricts output relative to a competitive industry, it would be less willing to pay a fixed cost to adopt a new technology. Arrow’s idea has been challenged and critiques have shown that under different assumptions, increases in competition lead to less innovation. We develop a new theory of why a monopolistic industry innovates less than a competitive industry. The key is that firms often face major problems in integrating new technologies. In some cases, upon adoption of technology, firms must temporarily reduce output. We call such problems switchover disruptions. If firms face switchover disruptions, then a cost of adoption is the forgone rents on the sales of lost or delayed production, and these opportunity costs are larger the higher the price on those lost units. In particular, with greater monopoly power, the greater the forgone rents. This idea has significant consequences since if we add switchover disruptions to standard models, then the critiques of Arrow lose their force: competition again leads to greater adoption. In addition, we show that our model helps explain the accumulating evidence that competition leads to greater adoption (whereas the standard models cannot).
Sujeito: D21 - Firm Behavior: Theory, L14 - Transactional Relationships; Contracts and Reputation; Networks, D42 - Market Structure, Pricing, and Design: Monopoly, O33 - Technological Change: Choices and Consequences; Diffusion Processes, L12 - Monopoly; Monopolization Strategies, and O32 - Management of Technological Innovation and R&D