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Free Trade and Protection of Intellectual Property Rights: Can We Have One Without the Other?

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Author Info
Goh, Ai Ting
Olivier, Jacques
Abstract

This Paper is concerned with the interaction between trade policies and the protection of Intellectual Property Rights (IPRs). In particular, it investigates, within the framework of a general equilibrium model with endogenous growth, the welfare implications of an international agreement on one or both policy instruments. High tariffs and low patent protection both allow agents of an individual country to consume more respectively, through rent extraction redistributed by lump-sum transfers, and lower mark-up. Both high tariffs and low patent protection reduce the incentives for firms to do R&D, and, hence, growth. The main insight concerning optimal policies are first, that the two policy instruments are substitutes and second, that they are affected by the same Prisoner's Dilemma problem. As a consequence, an agreement in both policy instruments is needed to achieve any positive welfare gains, which supports the long standing claim of policy makers from developed countries that protection of IPRs should be included in multilateral trade agreements.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3127.

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Date of creation: Jan 2002
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Handle: RePEc:cpr:ceprdp:3127

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Related research
Keywords: intellectual property rights; multilateral trade aggreements; trade policy;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Diwan, Ishac & Rodrik, Dani, 1991. "Patents, appropriate technology, and North-South trade," Journal of International Economics, Elsevier, vol. 30(1-2), pages 27-47, February. [Downloadable!] (restricted)
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  2. Bayoumi, T. & Coe, D.T. & Helpman, E., 1996. "R&D Spillovers and Global Growth," Papers 14-96, Tel Aviv.
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  3. Kyle Bagwell & Robert W. Staiger, 1999. "Domestic Policies, National Sovereignty and International Economic Institutions," NBER Working Papers 7293, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Grossman, Gene M. & Helpman, Elhanan, 1991. "Trade, knowledge spillovers, and growth," European Economic Review, Elsevier, vol. 35(2-3), pages 517-526, April. [Downloadable!] (restricted)
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  5. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November. [Downloadable!] (restricted)
  6. Mansfield, Edwin, 1985. "How Rapidly Does New Industrial Technology Leak Out?," Journal of Industrial Economics, Blackwell Publishing, vol. 34(2), pages 217-23, December. [Downloadable!] (restricted)
  7. Baldwin, Richard & Seghezza, Elena, 1996. "Trade-induced Investment-led Growth," CEPR Discussion Papers 1420, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
  9. Chin, J.C. & Grossman, G.M., 1988. "Intellectual Property Rigths And North-South Trade," Papers 143, Princeton, Woodrow Wilson School - Public and International Affairs.
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  10. Brian R. Copeland, 1990. "Strategic Interaction among Nations: Negotiable and Non-negotiable Trade Barriers," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 84-108, February. [Downloadable!] (restricted)
  11. Helpman, Elhanan, 1993. "Innovation, Imitation, and Intellectual Property Rights," Econometrica, Econometric Society, vol. 61(6), pages 1247-80, November. [Downloadable!] (restricted)
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  12. Yong Yang, 1998. "Why Do Southern Countries Have Little Incentive to Protect Northern Intellectual Property Rights?," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 800-816, November. [Downloadable!] (restricted)
  13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  14. Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alessandra Bonfiglioli & Gino Gancia, 2007. "North-South Trade and Directed Technical Change," UFAE and IAE Working Papers 713.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 27 Jun 2008. [Downloadable!]
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  2. Saint-Paul, Gilles, 2004. "Welfare Effects of Intellectual Property in a North-South Model of Endogenous Growth with Comparative Advantage," IDEI Working Papers 309, Institut d'Économie Industrielle (IDEI), Toulouse, revised May 2005. [Downloadable!]
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  3. Saint-Paul, Gilles, 2004. "To What Extent should less Developed Countries Enforce Intellectual Property?," IDEI Working Papers 336, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
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