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Intellectual Property Rights, Foreign Direct Investment, and Industrial Development

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  • Lee Branstetter
  • Kamal Saggi

Abstract

This paper develops a North-South product model in which Southern imitation and the North-South flow of foreign direct investment (FDI) are endogenously determined. In the model, a strengthening of IPR protection in the South reduces the rate of imitation, which, in turn, increases the flow of FDI. The increase in FDI more than offsets the decline in production undertaken by Southern imitators, so that the South’s share of goods produced by the global economy increases. Furthermore, real wages of Southern workers increase even though prices of goods produced by multinationals exceed those of Southern imitators. The preceding results hold when Northern innovation is endogenously determined; in addition, the rate of innovation increases with a strengthening of Southern IPR protection.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15393.

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Date of creation: Oct 2009
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Publication status: published as Lee Branstetter & Kamal Saggi, 2011. "Intellectual Property Rights, Foreign Direct Investment and Industrial Development," Economic Journal, Royal Economic Society, vol. 121(555), pages 1161-1191, 09.
Handle: RePEc:nbr:nberwo:15393

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  1. Nunnenkamp, Peter & Spatz, Julius, 2004. "Intellectual property rights and foreign direct investment : a disaggregated analysis," Open Access Publications from Kiel Institute for the World Economy, Kiel Institute for the World Economy (IfW) 3395, Kiel Institute for the World Economy (IfW).
  2. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "Foreign direct investment in a world of multiple taxes," Journal of Public Economics, Elsevier, Elsevier, vol. 88(12), pages 2727-2744, December.
  3. Mutti, John & Grubert, Harry, 2004. "Empirical asymmetries in foreign direct investment and taxation," Journal of International Economics, Elsevier, Elsevier, vol. 62(2), pages 337-358, March.
  4. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 9(2), pages 169-189, Spring.
  5. Glass, Amy Jocelyn & Wu, Xiaodong, 2007. "Intellectual property rights and quality improvement," Journal of Development Economics, Elsevier, Elsevier, vol. 82(2), pages 393-415, March.
  6. Eaton, J. & Kortum, S., 1995. "Trade in Ideas: Patenting and Productivity onn the OECD," Papers, Boston University - Department of Economics 34, Boston University - Department of Economics.
  7. Markusen, James R., 2001. "Contracts, intellectual property rights, and multinational investment in developing countries," Journal of International Economics, Elsevier, Elsevier, vol. 53(1), pages 189-204, February.
  8. Elhanan Helpman, 1992. "Innovation, Imitation, and Intellectual Property Rights," NBER Working Papers 4081, National Bureau of Economic Research, Inc.
  9. Glass, Amy Jocelyn & Saggi, Kamal, 2002. "Intellectual property rights and foreign direct investment," Journal of International Economics, Elsevier, Elsevier, vol. 56(2), pages 387-410, March.
  10. McCalman, P., 1999. "Reaping What You Sow: An Empirical Analysis of International Patent Harmonization," Papers, Australian National University - Department of Economics 374, Australian National University - Department of Economics.
  11. Shubham Chaudhuri & Pinelopi K. Goldberg & Panle Jia, 2006. "Estimating the Effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinolones in India," Working Papers id:772, eSocialSciences.
  12. Lai, Edwin L. -C., 1998. "International intellectual property rights protection and the rate of product innovation," Journal of Development Economics, Elsevier, Elsevier, vol. 55(1), pages 133-153, February.
  13. Janusz A. Ordover, 1991. "A Patent System for Both Diffusion and Exclusion," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 5(1), pages 43-60, Winter.
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Cited by:
  1. Benz, Sebastian, 2013. "Trading Tasks: A Dynamic Theory of Offshoring," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 79816, Verein für Socialpolitik / German Economic Association.
  2. Canals, Claudia & Şener, Fuat, 2014. "Offshoring and intellectual property rights reform," Journal of Development Economics, Elsevier, Elsevier, vol. 108(C), pages 17-31.
  3. Daron Acemoglu & Gino Gancia & Fabrizio Zilibotti, 2014. "Offshoring and Directed Technical Change," Working Papers 735, Barcelona Graduate School of Economics.
  4. Arghya Ghosh & Jota Ishikawa, 2013. "Trade Liberalization, Absorptive Capacity and the Protection of Intellectual Property Rights," Discussion Papers, School of Economics, The University of New South Wales 2013-11, School of Economics, The University of New South Wales.
  5. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2011. "Innovating like China: a theory of stage-dependent intellectual property rights," MPRA Paper 30553, University Library of Munich, Germany.
  6. Elisa Giuliani & Chiara Macchi, 2013. "Multinational Corporations’ Economic And Human Rights Impacts On Developing Countries: A Review And Research Agenda," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2013/158, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  7. Suzuki, Keishun, 2014. "Southern Innovation and Foreign Direct Investment," MPRA Paper 57054, University Library of Munich, Germany.
  8. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2014. "Stage-dependent intellectual property rights," Journal of Development Economics, Elsevier, Elsevier, vol. 106(C), pages 239-249.
  9. Anuj J. Mathew & Arijit Mukherjee, 2009. "Intellectual property rights, southern innovation and foreign direct investment," Faculty Working Papers, School of Economics and Business Administration, University of Navarra 15/09, School of Economics and Business Administration, University of Navarra.
  10. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2013. "Theory and Empirics of Stage-Dependent Intellectual Property Rights," Economics Working Paper Series, University of St. Gallen, School of Economics and Political Science 1306, University of St. Gallen, School of Economics and Political Science.

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