Rent-seeking andinnovation $

Innovations andtheir adoption are the keys to growth andd evelopment. Innovations are less socially useful, but more profitable for the innovator, when they are adopted slowly and the innovator remains a monopolist. For this reason, rent-seeking, both public andprivate, plays an important role in determining the social usefulness of innovations. This paper examines the political economy of intellectual property, analyzing the trade-off between private andpublic rent-seeking. While it is true in principle that public rent-seeking may be a substitute for private rent-seeking, it is not true that this results always either in less private rent-seeking or in a welfare improvement. When the public sector itself is selfish andbehaves rationally, we may experience the worst of public andprivate rent-seeking together. r 2003 Elsevier B.V. All rights reserved.