This paper constructs a theoretical model of trade and technology transfer to study a developing country’s choice of optimum tariffs and patent length. A Northern firm has a new good, which it must export to or produce in a Southern country. The Southern government simultaneously chooses an import tariff and patent length to maximize its welfare and induce foreign direct investment (FDI). The absence of patent protection requires high tariffs to induce FDI. This reduces welfare when the good is imported. A combination of patent length and tariffs can be used to reduce this loss and induce FDI. Thus Southern countries may have an incentive to protect patents, although never to the same extent as Northern countries.
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Paper provided by Centre interuniversitaire de recherche en économie quantitative, CIREQ in its series Cahiers de recherche with number
05-2004.
Find related papers by JEL classification: O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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