How does TRIPs compliance affect the economic growth of developing countries? Application of the Synthetic Control method

Pamela Smith and Sebastian J. Anti

The World Economy, 2022, vol. 45, issue 12, 3873-3906

Abstract: This paper examines the effects of intellectual property rights (IPRs) on the economic growth of countries, with special attention to developing countries. We examine both the strength of countries' IPRs, as well as their compliance with the 1995 Agreement on Trade‐Related Aspects of Intellectual Property Rights (TRIPs) of the World Trade Organization. Our theoretical framework is a growth model which distinguishes capital as physical capital, human capital and intellectual property. Our methods include panel regression techniques, plus a novel Synthetic Control method. The latter is valuable for examining policy effects in research situations where data are limited to small sample sizes; and where reverse causality and heterogeneity are concerns. The Synthetic Control method allows us to assess the impact of TRIPs compliance on economic growth relative to a counterfactual of what would have occurred in the absence of compliance. The results show that while select developing countries experience growth benefits from complying with the TRIPs agreement, others do not, supporting the notion that there is a wide range of heterogeneity in the effects of IPR reforms on growth. These findings are robust when we account for marginal institutional changes in IPRs, enforcement of IPRs, and technological capacity in developing countries.

Date: 2022
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