The Crowding-Out Effects of Long Duration of Patents

In this article we demonstrate how a long duration of patents affects investment in new product development. We construct an overlapping-generations model of saving, investment, and product innovation and show that a long duration of patents results in a high aggregate value of monopoly firms that compete for the younger generation's savings with investment in new product development. We analyze the crowding-out effects of long duration of patents and their implications for individual's welfare under different patent regimes.