Status Preference and the Effects of Patent Protection: Theory and Evidence

We build a growth model with status preference to explore the effects of patent protection on innovation and social welfare. The main results are as follows. There exists a non-monotonic relationship between patent protection and innovation, and the growth-rate-maximizing degree of patent protection decreases with the strength of status preference. Moreover, the effect of patent protection on social welfare is ambiguous, depending on the strength of status preference. Finally, a cross-section regression based on a cross-country dataset is employed to investigate the empirical evidence of our theory. A significantly non-monotonic relationship between patent protection and economic growth is found when the status preference is considered.