Knowledge for the Plan: Productivity Effects of Inventorship in a Socialist Economy

We contribute to empirical evidence on the productivity effects from an alternative system of patenting and innovation: The socialist innovation system including its ÆexclusiveÆ and ÆeconomicÆ patents. For the first time in German history, the ÆeconomicÆ patent was introduced in the German Democratic Republic (GDR), for which the state held the rights of usage and application. In this paper, we investigate the productivity effects of these types of patents with regard to knowledge generation, accumulation and diffusion in the socialist economy. By applying a Cobb-Douglas production function using original primary and harmonized productivity data and manually cleaned patent data of the GDR between 1970 and 1989, we show in a natural experiment setting that patenting contributed to productivity in the industry sectors similar to a market economy. While this holds for knowledge generation, accumulation and diffusion in general, international knowledge diffusion did not yield productivity gains in the presence of local interactive capabilities.