Intellectual Property Rights, Foreign Direct Investment, and Industrial Development

Lee Branstetter and Kamal Saggi ()

No 15393, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a North-South product model in which Southern imitation and the North-South flow of foreign direct investment (FDI) are endogenously determined. In the model, a strengthening of IPR protection in the South reduces the rate of imitation, which, in turn, increases the flow of FDI. The increase in FDI more than offsets the decline in production undertaken by Southern imitators, so that the South’s share of goods produced by the global economy increases. Furthermore, real wages of Southern workers increase even though prices of goods produced by multinationals exceed those of Southern imitators. The preceding results hold when Northern innovation is endogenously determined; in addition, the rate of innovation increases with a strengthening of Southern IPR protection.

JEL-codes: F23 F43 O31 O34 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ino and nep-ipr
Date: 2009-10
Note: ITI PR
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