A welfare analysis of global patent protection in a model with endogenous innovation and foreign direct investment

Tatsuro Iwaisako, Hitoshi Tanaka and Koichi Futagami

European Economic Review, 2011, vol. 55, issue 8, 1137-1151

Abstract: 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's 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.

Keywords: Foreign direct investment; Innovation; Intellectual property rights protection; Welfare analysis (search for similar items in EconPapers)
JEL-codes: F43 O33 O34 O40 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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Related works:
Working Paper: A Welfare Analysis of Global Patent Protection in a Model with Endogenous Innovation and Foreign Direct Investment (2011)
Working Paper: A Welfare Analysis of Global Patent Protection in a Model with Endogenous Innovation and Foreign Direct Investment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:55:y:2011:i:8:p:1137-1151

DOI: 10.1016/j.euroecorev.2011.05.001

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