Adam Smith Business School

Professor David Hémous, University of Zurich

Trade, Innovation and Optimal Patent Protection
Thursday, 11 May. 3 pm
Room 305. Main Building

Abstract

"Trade, Innovation and Optimal Patent Protection" by David Hémous (University of Zurich), Simon Lepot (University of Zurich), Thomas Sampson (LSE) and Julian Schärer (University of Zurich)

This paper studies optimal patent policy in open economies. We develop a quantitative model of patenting that integrates Helpman-Krugman and Eaton-Kortum trade theory. By endogenizing innovation and market power, the model formalizes the trade-off between the growth and price effects of patent protection. Counterfactual analysis using the calibrated model shows that stronger patent protection generates global benefits, but local costs, resulting in inefficiently weak protection. There are large potential gains from global cooperation, but realizing these gains requires bigger and more innovative economies to offer stronger protection. Consequently, the cooperative gains are not equally shared as developing countries' free ride on stronger patent rights provided by the developed world.

Bio

David Hémous received his PhD from Harvard University in 2012. He is a macroeconomist working on Economic Growth and Innovation. His work highlights that innovation responds to economic incentives and that public policies should be designed taking this dependence into account. In particular, he has showed in the context of climate change policy that innovations in the car industry responds to gas prices and that global and regional climate policies should support clean innovation to efficiently reduce CO2 emissions. His work on technological change and income distribution shows that higher labor costs lead to more automation, and that the recent increase in labor income inequality and in the capital share can be explained by a secular increase in automation. He has also showed that innovation affects top income shares. His work has been highlighted in several newspapers and magazines including Le Monde, The Economist, The Washington Post or Forbes, and it has been presented in policy circles such as COP 15 conference in Copenhagen or the French parliamentary meetings.

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First published: 3 May 2023