Seminar: Otto Toivanen, Helsinki Center of Economic Research, University of Helsinki.

Titlel: Returns to Inventors.

Abstract:

The return that inventors appropriate from their inventions forms a key incentive and remuneration mechanism for innovation. We utilize data on U.S. patents and their

inventors linked to Finnish employer-employee data to estimate the effect of

patenting on earnings. Inventors get a temporary 3% wage increase in the year of the

patent grant. In addition, there is a 4-5% increase in earnings four years after the

patent grant, which remains there for at least the following two years. The returns to

inventors depend on the quality of the patent, as measured through the number of

forward citations. Returns accrue through earnings, not capital income. Job changes

do not affect returns. Initially owning the patent first yields negative returns but

increases significantly the later returns, with the increases in years 5-6 after the

patent grant being of the order of 15-30% instead of 4-5%.