Trade Agreements and Cross-Border Patenting: How Much and When?

Do regional trade agreements (RTAs) promote cross-border patenting, and does the inclusion of legally enforceable intellectual property provisions (IPAs) strengthen this effect? We examine these questions using bilateral patent application data for 213 origin countries and 91 patent application authorities over the period 1980–2019. We embed an extended two-way fixed effects estimator for staggered difference-in-differences within a structural gravity framework, allowing RTA effects to vary across treatment cohorts and years since entry into force. We find that RTAs increase bilateral patent application flows between member countries by about 33 percent. Conventional two-way fixed effects estimates are substantially larger, indicating that ignoring treatment-effect heterogeneity can overstate the effects of RTAs. The average effect also masks important dynamics: the increase in patenting builds gradually for around fourteen years after an RTA enters into force and differs substantially across treatment cohorts. In contrast, effect of legally enforceable IP rovisions on patent flows emerge only after a considerable lag. By applying heterogeneity-robust staggered difference-in-differences methods to a structural gravity model, the paper provides new evidence on how RTAs affect cross-border technology diffusion and shows why conventional gravity estimates can be misleading when treatment effects vary across cohorts and over time.