Trademarks and trade concentration: evidence from the Madrid System (1995–2022)

Ismaeel Tharwat, Shahd Abou El Leil and Dina Abdel Fattah

Journal of Business and Socio-economic Development, 2026, vol. 6, issue 3, 270-286

Abstract: PurposeThis study aims to identify whether increases in trademark activity reshape countries' trade structure, specifically whether they raise or lower concentration across products and markets, and determine through which side of the bilateral relationship (origin vs destination) these effects operate.Design/methodology/approachWe assemble a bilateral country-pair panel (1995–2022) linking trademark activity (domestic and Madrid System filings) to trade concentration measures (Herfindahl–Hirschman Index (HHI); Theil indices decomposed into product and market components). To address endogeneity, we instrument trademarks using exogenous variation from the Madrid System's expansion and fee structure; specifications include origin, destination and year fixed effects with clustered standard errors.FindingsInbound (destination-side) trademark activity causally increases trade concentration, with robust effects on market concentration (imports and exports) in non-high-income destinations. Instrumental variables (IV) estimates are larger than ordinary least squares (OLS), indicating OLS understates the true effect. Product-level diversification effects under OLS attenuate under IV, suggesting that trademarks reallocate market shares rather than expand product variety. Origin-side effects are generally weak or insignificant.Research limitations/implicationsInstrument strength varies across income subsamples; while robust overall and for developing destinations, some high-income estimates have weaker first stages. Future work could integrate product-level brand intensity and firm-level outcomes to refine mechanisms.Originality/valueThis study provides the first causal evidence that trademarks rather than patents systematically increase trade concentration via demand-side (destination) channels, leveraging the Madrid System as an instrument and decomposed Theil measures to pinpoint mechanisms.

Keywords: Trademarks; Trade diversification; Trade concentration; IPR; Madrid System; Herfindahl–Hirschman Index; Theil index; Developing countries (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jbsedp:jbsed-10-2025-0484

DOI: 10.1108/JBSED-10-2025-0484

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