How do labor supply dynamics influence patent protection policies?

Abstract

This study investigates how labor supply dynamics influence patent policies. In many countries, labor supply growth has shifted from positive to declining or even negative trends, potentially affecting economic growth and, consequently, the effectiveness of patent protection. This is because research and development entrepreneurs-key drivers of growth-are primarily drawn from the labor force. Using a panel of 50 countries from 1998 to 2017, we empirically establish a significant relationship between patent protection and labor supply. We then employ an overlapping generations economy with variety expansion to identify the growth-maximizing level of patent protection. Our findings suggest that in countries with positive (negative) labor supply growth, the growth-maximizing level of patent protection should be tightened (may remain fully enforced or be tightened further) as labor supply growth declines. Therefore, in the face of declining labor supply growth, governments should either tighten or fully enforce patent protection.