The Effects of Patent Protection: A Growth Model with Status Preference

We build a growth model with status preference to explore the effects of patent protection on innovation, inequality and social welfare. The main results are as follows. There is a non-monotonic relationship between patent protection and innovation. In addition, the effect of patent protection on social welfare is non-monotonic when the strength of status preference is small, whereas patent protection lowers social welfare when the strength of status preference is large. Finally, strengthening patent protection enlarges wealth inequality when agents have different time and status preferences.