On The Role of Trademarks: From Micro Evidence to Macro Outcomes
March 2023
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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:
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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