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

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  • Goh, Ai Ting
  • Olivier, Jacques
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    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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    Bibliographic Info

    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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    References

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    2. Helpman, Elhanan, 1993. "Innovation, Imitation, and Intellectual Property Rights," Econometrica, Econometric Society, vol. 61(6), pages 1247-80, November.
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    10. 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.
    11. Ishac Diwan & Dani Rodrik, 1989. "Patents, Appropriate Technology, and North-South Trade," NBER Working Papers 2974, National Bureau of Economic Research, Inc.
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    13. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, And International Economic Institutions," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 519-562, May.
    14. 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.
    15. 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.
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    Cited by:
    1. Gino Gancia, 2003. "North-south trade and directed technical change," Economics Working Papers 834, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2006.
    2. Saint-Paul, Gilles, 2004. "To What Extent should less Developed Countries Enforce Intellectual Property?," IDEI Working Papers 336, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Saint-Paul, Gilles, 2004. "Welfare Effects of Intellectual Property in a North-South Model of Endogenous Growth with Comparative Advantage," CEPR Discussion Papers 4712, C.E.P.R. Discussion Papers.

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