Quantitative Assessment on Frictions in Technology Market

This paper studies how frictions in the patent market inhibit economic growth. I document that the patent market is considerably less developed in China than in the US. To understand this fact, I build a growth model incorporating three frictions in the patent market—search costs, fixed transaction costs, and information asymmetry on patent quality. The calibrated model matches the key features of China's patent market well. Quantitatively, eliminating all the frictions in the patent market would increase China's productivity growth by 44%. I also find that reducing search costs plays the most effective role in promoting the Chinese patent market.