Technological development and political stability: Patenting in Latin America and the Caribbean

We examine the effect of national political institutions on patent application rates. The expected future value of a patent, like any other form of property, depends at least partially on certainty about the future. In circumstances where policy stability is greatest, and hence political uncertainty least, one should expect more aggressive pursuit of intellectual property rights. We test these ideas using a 27 year panel of Latin American and Caribbean nations, estimating US patent applications and domestic patent applications by local inventors for each observation, and holding other economic and technological inputs to innovation constant. Our principal finding is that political stability matters to patenting. For US patent applications institutional system tenure, regardless of system type, increases patent applications. For domestic patent applications, institutional stability has either a weakly negative or insignificant effect, a result we attribute to generally escalating local patenting standards over time. The type of government influences both US and domestic patent applications rates, with a veto-players institutional coding better predicting marginal patenting rates than regime type.