Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries

Abstract

The objective of patent rights is to foster innovation and economic growth. However, to date, there is little robust evidence that patents “work” as intended.

Here, we study the impact of changes in effective patent rights within panels of up to 54 manufacturing industries in up to 72 countries between 1981-2000. We find that more patent-intensive industries responded to stronger patent laws with higher growth, which effect increased with GDP per capita. Between 1991-1995, an increase in the level of effective patent rights from Hong Kong to Australia would have raised the average growth of the leather industry by 1/18, but that of the other chemicals industry by about 1/5.

Patent rights increased growth through both factor accumulation and raising productivity. Our findings were robust to alternative measures of patent rights and patent intensity.

Keywords: patents, growth, manufacturing, productivity

JEL Classification: L60, O33, O34