Between Incentives and Costs: Rethinking Intellectual Property

October 30, 2025

There is no one-size-fits-all formula: impacts vary according to rules, economies, and historical moments

Protect to boost. This formula has been repeated for decades as a rationale for intellectual property regimes. However, looking at global data, the relationship between protection and economic growth proves to be far less obvious, and, in many cases, even contradictory.

In law and public policy, the underlying assumption is often that protecting certain creations, such as inventions, music, or trademarks, stimulates progress. The logic behind this view is as follows: if individuals know they will hold exclusive rights over their creation for a given period, they will have greater incentive to invest effort and resources in research and development.

However, the fact that this rationale sounds convincing does not mean it is always beneficial for society.

Macroeconomic effects

This is where macroeconomic effects come into play, that is, broad, aggregate impacts that affect the economy as a whole and manifest in variables such as Gross Domestic Product (GDP), unemployment rates, interest rates, and the trade balance. These effects can be triggered by public policies, unexpected events (such as financial crises or pandemics), or long-term trends like technological advancements.

Imagine if classic literary works never entered the public domain. Public schools and low-income families would face higher costs to acquire them, limiting access to education and reducing human capital formation. This, in turn, would affect productivity and long-term economic growth, impacting both GDP and unemployment rates.

This is an example of how the “protect-to-boost” logic can work at the micro level while generating negative macro effects. This is precisely one of the reasons for the existence of the public domain and copyright exceptions: to prevent structural barriers to knowledge.

Let’s explore how this issue is analyzed by some of the most prominent studies in the field of macroeconomics.

Unpacking the Evidence: what does economics say about the effects of intellectual property?

In 2022, Awaworyi Churchill, Luong, and Ugur published the paper “Does intellectual property protection deliver economic benefits? A multi-outcome meta-regression analysis of the evidence”. In short, the authors sought to determine whether or not intellectual property generated real macroeconomic benefits.

This was one of the most comprehensive scientific reviews ever conducted on the topic: 91 primary studies were analyzed, totaling 1,626 effect estimates divided into four core dimensions:

Technological innovation: whether protection stimulates new inventions and discoveries;
Technology diffusion: whether protection facilitates or hinders the spread of technology across countries and sectors;
Productivity: measured by the impact on production efficiency;
Economic growth: whether protection helps countries increase their income, measured, for instance, by GDP.

The researchers took several precautions to ensure the results were reliable, such as correcting for publication bias (the tendency to publish only studies with positive results) and accounting for differences across countries and historical periods. Additionally, they conducted tests using both comprehensive samples and restricted samples limited to articles published in top-tier scientific journals.

The conclusion: there is no strong evidence of positive effects of intellectual property protection across any of the dimensions analyzed.

This brings us back to the debate on remix culture and free culture that emerged in the 2000s, when Wikipedia and open-source software challenged the limits of copyright protection as the sole engine of innovation. Furthermore, Yochai Benkler (2006), in analyzing “commons-based peer production,” showed that non-proprietary incentives, such as reputation, cooperation, and knowledge sharing, can sustain highly productive ecosystems with significant economic and social impact. Indeed, one of the best-known empirical studies confirming this phenomenon comes from Brazil, with Lemos and Oona’s (2008) seminal analysis of tecnobrega.

Results in specific contexts

However, we should not draw hasty conclusions: the lack of a systematic effect does not imply an absence of impact in all cases.

Another study, by Papageorgiadis and Sharma (2016), demonstrated an “inverted U-shaped” relationship: very low or very high protection has little effect on innovation, whereas intermediate levels stimulate positive outcomes. In practical terms, balance is key: if the law allows anyone to copy anything (very low protection), companies will not invest in innovation; if the law is extremely rigid (very high protection), few people will have access to innovations.

Similarly, Acemoglu and Akcigit (2012) argue that this balance depends on the technology gap between leaders and followers within a sector: if there are too many rules protecting those in the lead (such as overly strict regulations), those lagging behind will never catch up. Furthermore, intellectual property laws can help technologies spread across countries, although this benefit is, in practice, small, as shown by Churchill, Luong, and Ugur.

Conclusion: caution and balance

The main takeaway from these studies is the need for caution and the rejection of extreme views.

Evaluated systematically, the effects of intellectual property protection have not been proven to drive long-term economic growth. Although this macroeconomic perspective is central to understanding the aggregate effects of IP protection, it does not seek to disregard individual rights: there are legitimate principles-based and moral foundations, such as the recognition of authorship itself, that can justify protection. Economic analysis offers a complementary lens, revealing how regulatory choices reverberate through society as a whole.

In other words, details matter: the outcome of protection depends on how rules are designed, the economic context in which they are applied, and each country’s historical moment. There is no one-size-fits-all model, and the optimal level of protection varies among nations and evolves over time. This is also why intellectual property must be periodically reexamined, especially in light of transformations with significant macroeconomic impact, such as Artificial Intelligence.

References

Daron Acemoglu, Ufuk Akcigit, Intellectual Property Rights Policy, Competition and Innovation, Journal of the European Economic Association, Volume 10, Issue 1, 1 February 2012, Pages 1–42, https://doi.org/10.1111/j.1542-4774.2011.01053.x

BENKLER, Yochai. The Wealth of Networks: How Social Production Transforms Markets and Freedom. New Haven: Yale University Press, 2006.

Awaworyi Churchill, S., Luong, H. M., & Ugur, M. (2022). Does intellectual property protection deliver economic benefits? A multi‐outcome meta‐regression analysis of the evidence. Journal of Economic Surveys, 36(5), 1477-1509.