- | Thursday, January 12
- 12:15 PM
- Kaiserplatz 7-9, 4th floor, Room 4.006
The Responsiveness of Inventing: Evidence from a Patent Fee Reform
Do financial incentives induce inventors to innovate more? I exploit a large reduction in the patent fee in the United Kingdom in 1884 to distinguish between its effect on increased efforts to invent, and a decrease in patent quality due to a lower quality threshold. For this analysis I create a detailed new dataset of 54,000 British inventors with renewal information for each patent, which serves as the main quality measure. A framework is developed that explains the increasing quality and the decreasing number of patents just before the fee falls. I use significant excess bunching after the fee reduction to identify the short-run response. In the longer run high-quality patenting increases by over 100 percent, and the share of new patents due to greater effort accounts for three quarters of the pre-reform share of high-quality patents. To test for the presence of credit constraints I generate two wealth proxies from inventor names and addresses, and find a larger innovation response for inventors with lower wealth. These results indicate efficiency gains from decreasing the cost of inventing and in addition, from relaxing credit constraints.