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Optimum tariffs and patent length in a model of North–South technology transfer

  • Sharmila Vishwasrao


    (Department of Economics, College of Business, Florida Atlantic University)

  • Srabana Gupta

    (The Penn State University, Erie)

  • Hassan Benchekroun


    (Department of Economics, McGill University, Montreal, Canada)

We study a developing country's choice of optimum tariffs and patent length in a theoretical model of trade and technology transfer. A Northern firm chooses whether to export or produce a new good in a Southern country. In the absence of patent protection, a high tariff is required to induce FDI. This reduces Southern welfare when the good is imported. The Southern government can combine a positive patent length with tariffs to reduce this loss and induce FDI. Thus Southern countries may have an incentive to protect patents, although never to the same extent as Northern countries.

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Paper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 04022.

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Length: 19 pages
Date of creation: Oct 2004
Date of revision: May 2005
Publication status: Forthcoming in International Review of Economics & Finance
Handle: RePEc:fal:wpaper:04022
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  1. Scherer, F M, 1972. "Nordhaus' Theory of Optimal Patent Life: A Geometric Reinterpretation," American Economic Review, American Economic Association, vol. 62(3), pages 422-27, June.
  2. Wilfred J. Ethier & James R. Markusen, 1991. "Multinational Firms, Technology Diffusion and Trade," NBER Working Papers 3825, National Bureau of Economic Research, Inc.
  3. M. Scott Taylor, 1993. "TRIPS, Trade, and Technology Transfer," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 625-37, August.
  4. Jean O Lanjouw, 2003. "The Introduction of Pharmaceutical Product Patents in India: Heartless Exploitation of the Poor and Suffering?," Levine's Working Paper Archive 618897000000000598, David K. Levine.
  5. James A. Brander & Barbara J. Spencer, 1980. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Working Papers 414, Queen's University, Department of Economics.
  6. Glass, Amy Jocelyn & Saggi, Kamal, 1999. "Multinational firms and technology transfer," Policy Research Working Paper Series 2067, The World Bank.
  7. Zigic, Kresimir, 2000. "Strategic trade policy, intellectual property rights protection, and North-South trade," Journal of Development Economics, Elsevier, vol. 61(1), pages 27-60, February.
  8. Neary, J Peter & Leahy, Dermot, 2000. "Strategic Trade and Industrial Policy towards Dynamic Oligopolies," Economic Journal, Royal Economic Society, vol. 110(463), pages 484-508, April.
  9. Svedberg, Peter, 1979. "Optimal Tariff Policy on Imports from Multinationals," The Economic Record, The Economic Society of Australia, vol. 55(148), pages 64-67, March.
  10. Miyagiwa, K. & Ohno, Y., 1993. "Closing the Technology Gap Under Protection," Discussion Papers in Economics at the University of Washington 93-09, Department of Economics at the University of Washington.
  11. Michael Ferrantino, 1993. "The effect of intellectual property rights on international trade and investment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 129(2), pages 300-331, June.
  12. Magnus Blomstrom & Jian-Ye Wang, 1989. "Foreign Investment and Technology Transfer: A Simple Model," NBER Working Papers 2958, National Bureau of Economic Research, Inc.
  13. Vishwasrao, Sharmila, 1994. "Intellectual property rights and the mode of technology transfer," Journal of Development Economics, Elsevier, vol. 44(2), pages 381-402, August.
  14. Lee, Jeong-Yeon & Mansfield, Edwin, 1996. "Intellectual Property Protection and U.S. Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 181-86, May.
  15. Katrak, Homi, 1977. "Multi-national Monopolies and Commercial Policy," Oxford Economic Papers, Oxford University Press, vol. 29(2), pages 283-91, July.
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