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On The Role of Trademarks: From Micro Evidence to Macro Outcomes

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March 2023

Written by: Emin Dinlersoz, Mehmet Yorukoglu, Nikolas Zolas, Nathan Goldschlag

Working Paper Number:

CES-23-16R

Abstract

What are the effects of trademarks on the U.S. economy? Evidence from comprehensive micro data on trademark registrations and outcomes for U.S. employer firms suggests that trademarks protect firm value and are linked to higher firm growth and marketing activity. Motivated by this evidence, trademarks are introduced in a general equilibrium framework to quantify their aggregate effects. Firms invest in product quality and engage in both informative and persuasive advertising to build a customer base subject to depreciation. Persuasive advertising induces a perception of higher quality. Firms can register trademarks to reduce customer depreciation and enhance product awareness. The model's predictions about trademark registrations, firm growth, and advertising expenditures align with the empirical evidence. The analysis shows that, compared to the counterfactual economy without trademarks, the U.S. economy with trademarks generates higher average product quality but lower variety, ultimately resulting in greater welfare and higher industry concentration. While informative advertising improves welfare, persuasive advertising reduces it. Nevertheless, the positive welfare impact of trademarks outweighs the negative effects of persuasive advertising.

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Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the text, highlighting the most significant topics and trends. This approach not only enhances searchability but provides connections that go beyond potentially domain-specific author-defined keywords. :
sale, manufacturer, product, innovation, patent, profit, revenue, competitor, incentive, patenting, consumer, trademark, marketing

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Census of Manufactures, Annual Survey of Manufactures, International Trade Commission, County Business Patterns, Federal Reserve Bank, Organization for Economic Cooperation and Development, Longitudinal Business Database, Census of Manufacturing Firms, Patent and Trademark Office, Census Bureau Business Register, Herfindahl Hirschman Index, Longitudinal Firm Trade Transactions Database, Disclosure Review Board, World Trade Organization, Customs and Border Protection, Business Dynamics Statistics

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