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A Welfare Analysis of Global Patent Protection in a Model with Endogenous Innovation and Foreign Direct Investment

Listed author(s):
  • Tatsuro Iwaisako

    ()

    (Graduate School of Economics, Osaka University)

  • Hitoshi Tanaka

    ()

    (Faculty of Economics, Hokkai Gaku-en University)

  • Koichi Futagami

    ()

    (Graduate School of Economics, Osaka University)

This paper constructs a North-South quality-ladder model in which foreign direct investment (FDI) is determined by the endogenous location choice of firms, and examines analytically how strengthening patent protection in the South affects welfare in the South. Strengthening patent protection increases the South fs welfare by enhancing innovation and FDI, but it also allows the firms with patents to charge higher prices for their goods, which decreases welfare. However, the model shows that the former positive welfare effect outweighs the latter negative effect. Moreover, introducing the strictest form of patent protection in the South, that is, harmonizing patent protection in the South with that in the North, may maximize welfare in the South as well as in the North. Further, a similar result can also be obtained in a nonscale effect model.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0924R.pdf
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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-24-Rev.

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Length: 57 pages
Date of creation: Aug 2009
Date of revision: Mar 2011
Handle: RePEc:osk:wpaper:0924r
Contact details of provider: Web page: http://www2.econ.osaka-u.ac.jp/library/global/e_HP/e_g_shiryo.html
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