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Patent Infringement and Strategic Trade Policies : R&D and Export Subsidies


  • Moonsung Kang

    (KIEP - Korea Institute for International Economic Policy)


Like the original Spencer-Brander result, the R&D incentives that we identify lead governments to set positive R&D subsides in the non-cooperative equilibrium. However, we find that if exporting governments could cooperate over their policy choices they would continue to subsidize R&D, rather than agreeing to tax R&D as in the original Spencer-Brander set-up. The reason is that under cooperation they will also agree to share perfectly the results of R&D investments (i.e., eliminate IPR protection), and R&D subsides are then required to maintain appropriate incentives for firms to engage in R&D investments. This last result is interesting for two reasons, both of which point to the importance of examining R&D subsides and IPR policies in tandem as we have done rather than in isolation as has heretofore typically been done. First, by this result we show that the case for strategic R&D subsides is more robust than previously thought, as it applies whether exporting governments are acting cooperatively or non-cooperatively, once their equilibrium choices of IPR protection are taken into account as well. And second, by this result we identify a puzzle as to why governments might wish to agree to jointly eliminate, rather than tighten, their levels of IPR protection, given that hey have at their disposal R&D outcomes. We show that the flavour of these findings extend as well to the case in which governments also have export policies at their disposal. In the original Spencer-Brander set-up, the addition of export policies leads governments to tax R&D and offer export subsides, pointing to another way in which the case for strategic R&D subsides appears to be fragile. But again out results imply that this fragility disappears in a setting in which the choice of IPR protection is modelled well.

Suggested Citation

  • Moonsung Kang, 2000. "Patent Infringement and Strategic Trade Policies : R&D and Export Subsidies," Trade Working Papers 21759, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:tradew:21759

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    Cited by:

    1. Suzanne Scotchmer, 2004. "The Political Economy of Intellectual Property Treaties," Journal of Law, Economics, and Organization, Oxford University Press, vol. 20(2), pages 415-437, October.
    2. Marcus Noland & Howard Pack, 2002. "Industrial Policies and Growth: Lessons From International Experience," Central Banking, Analysis, and Economic Policies Book Series,in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Economic Growth: Sources, Trends, and Cycles, edition 1, volume 6, chapter 9, pages 251-308 Central Bank of Chile.

    More about this item


    R&D subsidies; export subsidies; IPR protection;

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • 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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