The Impact of Intellectual Property Rights on Labor Productivity: Do Constitutions Matter?

Focusing on 22 OECD countries we estimate the impact of constitutional provisions and of lower-rank norms aimed at protecting intellectual property rights (IPR) on labor productivity at industry level. Our analysis allows us to answer the following questions: Are IPR more likely to be enforced if they are envisaged in the constitution rather than provided for in ordinary legislation? And if constitutional protection implies an accrued defense or enforcement of those principles, is this difference relevant enough to translate into a higher impact on firms’ outcome? By using IV techniques and controlling for a full set of year-, industry- and country fixed effects (and their interactions), we show that constitutional provisions protecting IPR positively affect the differential in labor productivity between high and low R&D intensive sectors. This effect is driven by the impact of IPR protection on R&D investment of the highly innovative sectors. Our results hold after controlling for lower-rank norms. Furthermore, the interaction between constitutional norms and lower legislation is negative, suggesting that the two are substitutes: the impact of constitutions is stronger in those countries where IPR protection by lower norms is weaker. On turn, in those countries where IPR are protected by constitutional norms, lower norms do not have a significant effect on the productivity of high R&D intensive sectors.