Description:
This study examines the impacts of two prevalent types of patent promotion policies (reward and subsidy policies) by constructing a tractable general equilibrium model to examine the effectiveness of patent promotion policies in promoting research activities as well as the production of high-quality and low-quality innovations. We derived testable hypotheses from the model, which we verified using the novel difference-in-differences model of Callaway and Sant'Anna (2021) which allows for heterogeneity treatment timing and effects across treatment groups. We collected patent-level data in 1985-2009 from the China National Intellectual Property Administration and patent promotion policy data from Chinese provinces. Our analysis indicates that patent promotion policies effectively increase R&D research activities and patent production, though they increase almost indiscriminately both the high-quality and low-quality patents. These conclusions are robust even if we employ an alternative definition of high-quality and low-quality patents