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Welfare Effects of Intellectual Property in a North-South Model of Endogenous Growth with Comparative Advantage

  • Saint-Paul, Gilles

This Paper develops a model for analysing the costs and benefits of intellectual property enforcement in LDCs. The North is more productive than the South and is the only source of innovator. There are two types of goods, and each bloc has a comparative advantage in producing a specific type of good. If comparative advantage is strong enough, even under piracy there are goods that the South will not produce. Piracy will then lead to a reallocation of innovative activity in favour of these goods. That may harm consumers (including consumers in the South) to the extent that these goods have smaller dynamic learning externalities than the other goods, and that their share in consumption is small. Thus, whether or not piracy is in the interest of the South depends on how important are the goods for which it has a comparative advantage to its consumers, and what the growth potential of these goods is. While, all else equal, the North tends to lose more (or gain less) from piracy than the South, because monopoly profits eventually accrue to the North, the South may lose more than the North if there is a strong enough home bias in favour of the goods for which it has a comparative advantage.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 309.

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Date of creation: Sep 2004
Date of revision: May 2005
Publication status: Published in E-conomics, n°5, février 2008.
Handle: RePEc:ide:wpaper:2893
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  1. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
  2. Gilles Saint-Paul, 2005. "To What Extent Should Less-Developed Countries Enforce Intellectual Property Rights?," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(3), pages 175-196, July.
  3. Alessandra Bonfiglioli & Gino Gancia, 2007. "North-South Trade and Directed Technical Change," UFAE and IAE Working Papers 713.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 27 Jun 2008.
  4. McCalman, P., 1999. "Reaping What You Sow: An Empirical Analysis of International Patent Harmonization," ANU Working Papers in Economics and Econometrics 1999-374, Australian National University, College of Business and Economics, School of Economics.
  5. Goh, Ai Ting & Olivier, Jacques, 2002. "Free Trade and Protection of Intellectual Property Rights: Can We Have One Without the Other?," CEPR Discussion Papers 3127, C.E.P.R. Discussion Papers.
  6. Gene M. Grossman & Edwin L.-C. Lai, 2004. "International Protection of Intellectual Property," American Economic Review, American Economic Association, vol. 94(5), pages 1635-1653, December.
  7. Thoenig, Mathias & Verdier, Thierry, 2002. "A Theory of Defensive Skill-based Innovation and Globalization," CEPR Discussion Papers 3416, C.E.P.R. Discussion Papers.
  8. Gould, David M. & Gruben, William C., 1996. "The role of intellectual property rights in economic growth," Journal of Development Economics, Elsevier, vol. 48(2), pages 323-350, March.
  9. Ishac Diwan & Dani Rodrik, 1989. "Patents, Appropriate Technology, and North-South Trade," NBER Working Papers 2974, National Bureau of Economic Research, Inc.
  10. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  11. 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.
  12. Smith, Pamela J., 1999. "Are weak patent rights a barrier to U.S. exports?," Journal of International Economics, Elsevier, vol. 48(1), pages 151-177, June.
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