Dead poets' property—how does copyright influence price?

• Author: Megan MacGarvie,Xing Li,Petra Moser
• Date: 01 March 2018
• Published date: 01 March 2018
• DOI: http://doi.org/10.1111/1756-2171.12223

RAND Journal of Economics

Vol.49, No. 1, Spring 2018

pp. 181–205

Dead poets’ property—how does copyright

influence price?

Xing Li∗

Megan MacGarvie∗∗

and

Petra Moser∗∗∗

Copyrights create long-lived intellectual property in goods ranging from science, literature, and

music to news, film, and software. The economic effects of copyright, however, are difficult to

identify in modern settings. This article exploits an unintended differential increase in copyright

length under the UK Copyright Act of 1814—in favor of books by dead authors—to examine

the effects of longer copyright terms on price. We find that a doubling in copyright length was

associated with a substantial (roughly 50%) increase in the price of books. Additional years of

copyright improved publishers’ ability to practice intertemporal price discrimination.

1. Introduction

Copyrights, which grant intellectual property (IP) in music, video, software, and other

types of content, have become an increasingly important mechanism to encourage creativity

and innovation. Between 1990 and 2011, for example, US employment in copyright-intensive

industries such as computer systems design, books, and videos, increased by 46% (Blank and

Kappos, 2012). Compared with patents, copyrights provide IP rights that are narrow, which avoid

inefficiencies that are associated with broad patents. Yet copyrights are also extremelylong-lived,

with 95 years of exclusive rights for corporate owners in the United States and Europe.

∗Peking University; xingli@gsm.pku.edu.cn.

∗∗Boston University; mmacgarv@bu.edu.

∗∗∗New York University; pmoser@stern.nyu.edu.

We thank seminar participants at Berkeley, Chicago Economics and Booth, Columbia, Harvard Economics and HBS,

KAIST, Michigan, Northwestern Economics and Kellogg, the NBER, Rutgers, Stanford, and Yale, as well as Ashish

Arora, KyleBagwell, Tim Bresnahan, Bronwyn Hall, Paul Goldstein, Paul Heald, Scott Hemphill, Eric Hilt, Ryan Lampe,

Paul Rhode, Lars Stole, Sotaro Shibayama, Joel Watson, Gavin Wright, Yiqing Xing, and Noam Yuchtmanfor helpful

comments. Siyeona Chang, T.J. Hanes, and Ethan Shibutani provided excellent research assistance. We are also grateful

for financial support through Stanford’sSecond Year Graduate Research Program, the NBER Program on the Economics

of Copyright and Digitization, and the Kauffman Foundation.Moser g ratefullyacknowledges financial support from the

Center for Advanced Study in the Behavioral Sciences (CASBS) and NSF CAREER grant no. 1151180.

C2018, The RAND Corporation. 181

182 / THE RAND JOURNAL OF ECONOMICS

The length of copyrights creates important policy trade-offs that operate through the price of

copyrighted work. For example, a basic model of copyrights implies that a shift toward stronger

copyrights raise profits for authors by increasing the price of copyrighted goods (Landes and

Posner,1989), which may, in turn, encourage creativity.1However, higher prices reduce consumer

surplus by restricting the use of copyrighted goods (Handke, 2011), and they mayeven discourage

reuse and the creation of follow-on innovations (Biasi and Moser, 2016; Nagaraj, 2016).

Despite the centrality of its implications, the effects of copyright length on price are poorly

understood, and empirical evidence is inconclusive.2This is primarily due to two empirical

challenges: the extreme length of modern copyright terms and a scarcity of experimental variation

in modern policies. At current terms of 95 years, only goods that are exceptionally durable are

still for sale when they come off copyright. Landes and Posner (2003), for example, show that

less than 2% of 10,027 books published in 1930 were still in print in 2001. The resulting selection

bias makes it difficult to identify the price effects of copyight length in modern data.3

A second challenge for identifying the effects of copyrights is that changes in modern

copyrights typically occur in response to lobbying by the owners of particularly valuable and

long-lived goods. The 1998 (Sonny Bono) US Copyright Act, for example, has been nicknamed

the Mickey Mouse Protection Act because copyright for “Steamboat Willie” would have expired

in 2003, and Disney “lobbied hard” for an extension (Lessig, 2000; Varian, 2005).4Similarly,

Britain’s 2011 law to extend copyright lengths for music is known as Cliff (Richard)’s Law

(Halliday, 2011).

To address these empirical challenges, this article exploits an unanticipated and unintended

differential increase in the length of copyrights—from lowlevels of existing copyright lengths. In

1814, Britain’s Parliament passed the CopyrightAct to clarify a requirement to deposit copyrighted

books with research libraries. Due to the timely and opportunistic intervention of a member of

parliament, however, who was also an author, the law also extended the length of copyrights in

an unusual way. Until 1814, the length of copyright was 14 years (starting from the first edition)

for books whose authors had died within 14 years since the first edition, and 28 years for books

whose authors had survived the first 14 years. After 1814, copyright length increased from 14

to 28 years for books whose authors had died within 14 years since the first edition, and from

28 years to author’s remaining years of life for books whose authors had survived the 14-year

term. Given the life expectancies of romantic period authors, this change created no meaningful

increase in copyright length for living authors, but it created a 14-year extension for books by

dead authors.5

Our empirical design takes advantage of this differential increase in copyright length to

compare changes in price after 1814 for books by dead and living authors. This difference-in-

differences approach allows us to control for unobservable factors that may have changed the

price of all books after 1814, irrespective of changes in copyright length. For example, books

may have become more expensive after 1814 because the demand for reading increased with

improvements in literacy. Book prices may also havedeclined as a result of technological progress

that reduced production costs, for example, through the diffusion of continuous papermaking and

1Critics of intellectual property,however, argue that creative individualscan find other ways “to appropriate a large

enough share of the social surplus generated by their innovations” without copyrights(Boldrin and Levine, 2005).

2Existing empirical analysis have focused on the effects of piracy. For example, Oberholzer-Gee and Strumpf

(2007) have found that shifts towardfile sharing had limited effects on record sales, and Waldfogel (2011) shows that file

sharing has not reduced the supply of recorded music.

3Heald (2008) and Reimers (2017) examine books 75 years after publications: bestsellers publishedbetween 1923

and 1932 (still on copyright in 2006), and bestsellers first published between 1919 and 1922 (offcopyright). Heald finds

no price effects in his full sample, whereas Reimers finds that prices are higher for copyrighted works.

4The 1998 Act extended copyrights from 50 years to 70 years after an author’s death for individual owners and

from 75 years to 95 years for corporate owners.

5Section 2 presents life tables, which calculate life expectancies for romantic period authors in 1814, conditional

on the author having reached 46, the age of the average authorat the time of the first edition.

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