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The economics of intellectual property rights under imperfect enforcement: developing countries, biotechnology, and the TRIPs agreement

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Author Info
Giannakas, Konstantinos
Abstract

This paper develops a model of heterogeneous producers to examine the economic causes of IPR infringement and its consequences for the welfare of the interest groups and the pricing and adoption of a new technology (i.e., a genetically modified seed) in the context of a small open developing economy. Enforcement of IPRs, and pricing and adoption of the new technology are modeled as a sequential game between the government that enforces the IPRs, a foreign innovating firm that prices the new technology, and the developing country's producers who make the production and cheating decisions. Analytical results show that complete deterrence of IPR infringement is not always economically optimal. IPR infringement affects the welfare of the interest groups and has important ramifications for the pricing and adoption of the new technology. The quantitative nature of the results depends critically on the existing labeling regime. The analysis also shows that differences in the level of IPR enforcement provide an alternative justification for (and explanation of) differences in the pricing of the new technology in different countries around the world - a strategy adopted by leading innovators in the sector. Finally, the results suggest that if the penalties for IPR infringement under the TRIPs agreement follow the custom of retaliatory sanctions under the GATT, enforcement of IPRs will remain imperfect and the innovators' ability to obtain value for their biotech traits will still be limited.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series EPTD discussion papers with number 80.

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Date of creation: 2001
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Handle: RePEc:fpr:eptddp:80

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Related research
Keywords: Intellectual property.; Biotechnology Economic aspects.; Plant breeding.;

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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. Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484.
  2. Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March. [Downloadable!] (restricted)
  3. Maskus, Keith E. & Penubarti, Mohan, 1995. "How trade-related are intellectual property rights?," Journal of International Economics, Elsevier, vol. 39(3-4), pages 227-248, November. [Downloadable!] (restricted)
  4. Shavell, Steven, 1987. "The Optimal Use of Nonmonetary Sanctions as a Deterrent," American Economic Review, American Economic Association, vol. 77(4), pages 584-92, September. [Downloadable!] (restricted)
  5. Stigler, George J, 1970. "The Optimum Enforcement of Laws," Journal of Political Economy, University of Chicago Press, vol. 78(3), pages 526-36, May-June. [Downloadable!] (restricted)
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  6. Ballard, Charles L & Fullerton, Don, 1992. "Distortionary Taxes and the Provision of Public Goods," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 117-31, Summer. [Downloadable!] (restricted)
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  7. Alston, Julian M. & Venner, Raymond J., 2000. "The effects of the U.S. Plant Variety Protection Act on wheat genetic improvement:," EPTD discussion papers 62, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  8. M. Scott Taylor, 1993. "TRIPS, Trade, and Technology Transfer," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 625-37, August. [Downloadable!] (restricted)
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