The relationship between patent protection, incentives to innovate, the generation of innovations, and the accrual of benefits from innovation was investigated. The study was based on an analysis of research and development, patenting, productivity and output data for Italy. In 1979, Italy made significant changes in its patent law to conform with European Economic Community standards. Previously, the Italian law had provided weak protection of intellectual property, which includes product or process innovations, publications, and art. Economic theory predicts that, under certain conditions, such a change should increase the amount of resources devoted to innovation. Furthermore, an increase in successful innovative activity is expected to lead to increases in the growth of per capita gross domestic product. / Master of Arts