Financial Development , Intellectual Property Rights , and Growth

This paper explores the interaction between long run economic growth, financial development, and intellectual property rights through a general equilibrium, over-lapping generation, infinite horizon, endogenous R&D model with heterogeneous agents. I find that a reduced collateral constraint leads to both an ability to engage more heavily in research and a reduced incentive to engage in research. I show that intellectual property rights become relatively more important as countries become more financially developed and, therefore, less collateral constrained. This has implications both on policy development and empirical research on the effects of financial development. I find that as countries develop financially it is relatively more important to consider legislating explicit intellectual property rights. ∗I’m very grateful to Adriano Rampini, Hengjie Ai, Lukas Schmidt, Simone Gervais, and S. Viswanathan for helpful comments. All errors are my own.