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Would global patent protection be too weak without international coordination?

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  • Lai, Edwin L.-C.
  • Yan, Isabel K.M.

Abstract

In the standard model with free trade and social-welfare-maximizing governments à la Grossman and Lai (2004), cross-border positive policy externalities result in countries choosing a combination of patent strengths that is weaker than optimal from a global perspective. This paper introduces three new features to the analysis: trade and FDI barriers, firm heterogeneity and political economy considerations in setting patent policies. Based on calibration, we find that there would be global under-protection of patent rights when there is no international policy coordination. The empirical fact that firm revenues follow a fat-tailed distribution implies that the barriers to exploit inventions internationally are quite low, despite the fact that only a small fraction of firms sell overseas and an even smaller fraction of firms carry out FDI as a result of trade barriers. Furthermore, requiring all countries to harmonize their patent standards with the equilibrium standard of the most innovative country (the US) does not lead to global over-protection of patent rights.

Suggested Citation

  • Lai, Edwin L.-C. & Yan, Isabel K.M., 2013. "Would global patent protection be too weak without international coordination?," Journal of International Economics, Elsevier, vol. 89(1), pages 42-54.
  • Handle: RePEc:eee:inecon:v:89:y:2013:i:1:p:42-54
    DOI: 10.1016/j.jinteco.2012.07.004
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    References listed on IDEAS

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    Cited by:

    1. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    2. Briggs, Kristie, 2013. "Does patent harmonization impact the decision and volume of high technology trade?," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 35-51.
    3. Ming Liu & Sumner la Croix, 2013. "A Cross-Country Index of Intellectual Property Rights in Pharmaceutical Innovations," Working Papers 201313, University of Hawaii at Manoa, Department of Economics.
    4. Difei Geng & Kamal Saggi, 2013. "The case for non-discrimination in the international protection of intellectual property," Vanderbilt University Department of Economics Working Papers 13-00017, Vanderbilt University Department of Economics.
    5. Geng, Difei & Saggi, Kamal, 2015. "Is there a case for non-discrimination in the international protection of intellectual property?," Journal of International Economics, Elsevier, vol. 97(1), pages 14-28.
    6. Wu, Tommy T., 2015. "Firm heterogeneity, trade, multinationals, and growth: A quantitative evaluation," Journal of International Economics, Elsevier, vol. 97(2), pages 359-375.

    More about this item

    Keywords

    Intellectual property rights; Patents; TRIPS; Harmonization;

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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