The Effect of Intellectual Property Rights on Domestic Innovation in the Pharmaceutical Sector

This paper analyses the causal impact of Intellectual Property Rights (IPR) on pharmaceutical innovation in a panel of 74 countries. The identification strategy exploits the different timing across countries of two sets of IPR reforms. Domestic innovation is measured as citation-weighted domestic patents filed at the European Patent Office (EPO): to account for their distribution, count data models are used. A Zero Inated Negative Binomial model is adopted to consider the choice not to patent at the EPO. Results show that, in the short-run, IPR stimulate innovation. The effect for developing countries is roughly half of that for developed countries.