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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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    Cited by:
    1. Saint-Paul, Gilles, 2004. "To What Extent should less Developed Countries Enforce Intellectual Property?," IDEI Working Papers 336, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Saint-Paul, Gilles, 2008. "Welfare Effects of Intellectual Property in a North-South Model of Endogenous Growth with Comparative Advantage," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(5), pages 1-24.
    3. 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.

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