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Intellectual Property Rights and North-South Trade

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  • Judith C. Chin
  • Gene M. Grossman

Abstract

We study the incentive that a government in the South has to protect the intellectual property rights of Northern firms, and the consequences of the decision taken by the South for welfare in the North and for efficiency of the world equilibrium. We conduct our analysis in the context of a competition between a single Northern producer and a single Southern producer selling some good to an integrated world market. In this competition, only the Northern firm has the ability to conduct R&D in order to lower its production costs, but the Southern firm can imitate costlessly if patent protection for process innovations is not enforced by the government of the South. We find that the interests of the North and the South generally conflict in the matter of protection of intellectual property, with the South benefiting from the ability to pirate technology and the North harmed by such actions. A strong system of intellectual property rights may or may not enhance world efficiency.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2769.

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Date of creation: Nov 1988
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Publication status: published as The Political Economy of International Trade, edited by Ronald Jones and Anne O. Krueger, pp. 90-107. Oxford: Basil Blackwell, 1990.
Handle: RePEc:nbr:nberwo:2769

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  1. Michael L. Katz & Carl Shapiro, 1985. "On the Licensing of Innovations," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 504-520, Winter.
  2. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
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