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Innovation and Imitation in a Model of North-South TradeRecent evidence on world trade patterns reveals North-South specialization across

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  • Borota, Teodora

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    (Department of Economics)

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    Abstract

    Recent evidence on world trade patterns reveals North-South specialization across products of the same industries and product groups but different quality, which is not matched by the predictions of traditional and new trade theory. This paper analyzes a model of North-South trade and endogenous growth through innovation and imitation that can predict the observed trade patterns. The model is used to re-examine the impact of trade and Intellectual Property Rights (IPR) protection on both the innovation in the North and the imitational lag of the South. Opening to trade increases the growth rate and welfare of both regions, but results in a larger lag in the quality level of the South. With free trade the quality lag of the South is positive even with no IPR protection as a result of a revealed comparative advantage in lower quality goods production and trade. This contradicts the common predictions of Southern take-over of the whole industries due to bad IPR enforcement. Stronger IPR protection has a negative effect on growth and deteriorates the lag of the South, but the welfare effects of the alternative IPR policy instruments may be different.

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    Bibliographic Info

    Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2010:6.

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    Length: 44 pages
    Date of creation: 09 Apr 2010
    Date of revision:
    Handle: RePEc:hhs:uunewp:2010_006

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    Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
    Phone: + 46 18 471 25 00
    Fax: + 46 18 471 14 78
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    Web page: http://www.nek.uu.se/
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    Related research

    Keywords: North-South trade; quality heterogeneity; endogenous growth; innovation and imitation; intellectual property rights;

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