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Patents, Appropriate Technology, and North-South Trade

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Author Info
Ishac Diwan
Dani Rodrik

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Abstract

We consider the differential incentives of the North and the South to provide patent protection to innovating firms in the North. The two regions are assumed to have a different distribution of preferences over the range of exploitable technologies. Due to the scarcity of R&D resources, the two regions are in potential competition with each other to encourage the development of technologies most suited to their needs. This provides a motive for the South to provide patent protection even when it constitutes a small share of the world market and hence has strong free riding incentives otherwise. A benevolent global planner will set equal rates of patent protection only when it weights the welfare of the two regions equally. We find that the comparative statics of the Nash equilibrium exhibit considerable ambiguity. Numerical simulations in the benchmark case yield the following results: (i) when the technological preferences of the two countries become more similar, the level of patent protection provided by the South is reduced; (ii) when the relative market size of the South is increased, the South enhances its patent protection. In both cases, the level of Northern patents is relatively insensitive.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2974.

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Date of creation: May 1989
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Handle: RePEc:nbr:nberwo:2974

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Deolalikar, Anil B & Roller, Lars-Hendrik, 1989. "Patenting by Manufacturing Firms in India: Its Production and Impact," Journal of Industrial Economics, Blackwell Publishing, vol. 37(3), pages 303-14, March. [Downloadable!] (restricted)
  2. Colleen Hamilton & John Whalley, 1988. "Coalitions in the Uruguay Round: The Extent, Pros and Cons of Developing Country Participation 1,2," NBER Working Papers 2751, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Adam B. Jaffe, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits and Market Value," NBER Working Papers 1815, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Margaret R. Kelly & Naheed Kirmani & Peter Winglee & Miranda Xafa & Clemens F. J. Boonekamp, 1988. "Issues and Developments in International Trade Policy," IMF Occasional Papers 63, International Monetary Fund.
  5. John Whalley, 1989. "Coalitions in the Uruguay round," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 125(3), pages 547-562, September. [Downloadable!] (restricted)
  6. Dasgupta, Partha, 1988. "Patents, Priority and Imitation or, the Economics of Races and Waiting Games," Economic Journal, Royal Economic Society, vol. 98(389), pages 66-80, March. [Downloadable!] (restricted)
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