DP6925 'Essential' Patents, FRAND Royalties and Technological Standards
Author(s):	Mathias Dewatripont, Patrick Legros
Programme Area:	IO
Programme Area: IO
Keyword(s): padding, royalty, Standard setting organization, weak patent, Frand
Abstract: In this paper we abandon the usual assumption that patents bring known benefits to the industry or that their benefits are known to all parties. When royalty payments are increasing in one’s patent portfolio, private information about the quality of patents leads to a variety of distortions, in particular the incentives of firms to 'pad' by contributing weak patents. Three main results that emerge from the analysis are that: (i) the threat of court disputes reduces incentives to pad but at the cost of lower production of strong patents; (ii) mitigating this undesirable side-effect calls for a simultaneous increase in the cost of padding, that is, a better filtering of patent applications; (iii) upstream firms have more incentives to pad than vertically-integrated firms which internalize the fact that patent proliferation raises the share of profits going to the upstream segment of the industry but at the expense of its downstream segment. This seems consistent with recent evidence concerning padding.
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DP6926 Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity
Author(s):	Daniel Ackerberg, Paul J. Devereux
Programme Area:	LE
Programme Area: LE
Keyword(s): JIVE, weak instruments
Abstract: We introduce two simple new variants of the Jackknife Instrumental Variables (JIVE) estimator for overidentified linear models and show that they are superior to the existing JIVE estimator, significantly improving on its small sample bias properties. We also compare our new estimators to existing Nagar (1959) type estimators. We show that, in models with heteroskedasticity, our estimators have superior properties to both the Nagar estimator and the related B2SLS estimator suggested in Donald and Newey (2001). These theoretical results are verified in a set of Monte-Carlo experiments and then applied to estimating the returns to schooling using actual data.
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DP6927 Control Rights over Intellectual Property: Corporate Venturing and Bankruptcy Regimes
Author(s):	Sudipto Bhattacharya, Sergei Guriev
Programme Area:	FE
Programme Area: FE
Keyword(s): control rights, corporate venturing, patents, trade secrets
Abstract: We develop a theory of control rights in the context of licensing interim innovative knowledge for further development, which is consistent with the inalienability of initial innovator’s intellectual property rights. Control rights of a downstream development unit, a buyer of the interim innovation, arise from its ability to prevent the upstream research unit from forming financial coalitions at the ex interim stage of bargaining, over the amount and structure of licensing fees as well as the mode of licensing, based either on trade secrets or on patents. We model explicitly the equilibrium choice of the temporal structure of licensing fees, and show that the innovator’s ex interim financial constraint is more likely to bind when the value of her innovation is low. By constraining the financial flexibility of the upstream unit vis-a-vis her choice over the mode of licensing of her interim knowledge, the controlling development unit is able to reduce the research unit’s payoff selectively in such contingencies. This serves to incentivise the research unit to expend more effort ex ante, to generate more promising interim innovations. We further show that such interim-inefficient control rights can nevertheless be renegotiation-proof.
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DP6928 Dots to Boxes: Do the Size and Shape of Spatial Units Jeopardize Economic Geography Estimations?
Author(s):	Anthony Briant, Pierre-Philippe Combes, Miren Lafourcade
Programme Area:	IT
Programme Area: IT
Keyword(s): agglomeration, concentration, gravity, MAUP, wage equation
Abstract: This paper evaluates, in the context of economic geography estimates, the magnitude of the distortions arising from the choice of zoning system, which is also known as the Modifiable Areal Unit Problem (MAUP). We consider three standard economic geography exercises (the analysis of spatial concentration, agglomeration economies, and trade determinants), using various French zoning systems differentiated according to the size and shape of spatial units, which are the two main determinants of the MAUP. While size matters a little, shape does so much less. Both dimensions seem to be of secondary importance compared to specification issues.
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DP6929 Happiness Inequality in the United States
Author(s):	Betsey Stevenson, Justin Wolfers
Programme Area:	LE, PP
Programme Area: LE, PP
Keyword(s): happiness, subjective well-being, inequality
Abstract: This paper examines how the level and dispersion of self-reported happiness has evolved over the period 1972-2006. While there has been no increase in aggregate happiness, inequality in happiness has fallen substantially since the 1970s. There have been large changes in the level of happiness across groups: Two-thirds of the black-white happiness gap has been eroded, and the gender happiness gap has disappeared entirely. Paralleling changes in the income distribution, differences in happiness by education have widened substantially. We develop an integrated approach to measuring inequality and decomposing changes in the distribution of happiness, finding a pervasive decline in within-group inequality during the 1970s and 1980s that was experienced by even narrowly-defined demographic groups. Around one-third of this decline has subsequently been unwound. Juxtaposing these changes with large rises in income inequality suggests an important role for non-pecuniary factors in shaping the well-being distribution.
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DP6931 Fiscal Conservatism in a New Democracy: 'Sophisticated' versus 'Naïve' Voters
Author(s):	Paulo Arvate, George Avelino, José Tavares
Programme Area:	IM, PP
Programme Area: IM, PP
Keyword(s): Budget Deficits, Elections, Fiscal Conservatism, Political Cycles
Abstract: Several authors claim that voters in new democracies reward deficits at the polls and this fact is due to a lack of 'voter sophistication'. We test this claim for gubernatorial elections in Brazil, an important case study since it is the fourth most populous democracy in the world, displays a high variance in economic and social characteristics across states, and effectively imposes mandatory voting. Our evidence shows that voters are fiscally conservative, that is, they reward lower deficits, which is in contradiction to the literature. We do find that, when we use state income per capita, education and income inequality as proxies for 'voter sophistication', 'naïve' voters do not reward low deficits as opposed to 'sophisticated' voters, and education is the key element for this distinction. We propose that education rather than the youth of the democracy, is the key element for assessing voter 'sophistication'.
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Total Papers listed: 6