Perspectives from Law, Economics and Political Economy
Edited by Meir Perez Pugatch
Chapter 3: Can Stronger Intellectual Property Rights Boost Trade, Foreign Direct Investment and Licensing in Developing Countries?
Douglas Lippoldt INTRODUCTION In recent decades proponents of strengthened intellectual property rights (IPRs) have argued their case from a variety of angles, often including an emphasis on the potentially positive eﬀects for economic growth in developing countries. Stronger patent rights, for example, might encourage foreign rights holders to trade, invest directly or license intellectual property in developing countries.1 Yet, as Maskus (2000) and others point out, theoretical models are ambiguous on some dimensions of the relationship between the strength of IPRs and indicators of economic activity. An examination of the empirical evidence is needed to untangle the complex relationships among these variables. Why does this issue matter for economic development? The economic well-being of a nation is linked closely to the availability of resources and technology. Progress in the latter plays a central role in boosting output per worker and is an important determinant of income levels.2 Developing countries, particularly in the earlier stages of development, may face limitations in resources and the ability of domestic sources of innovation to respond adequately to the incentives from stronger IPRs. Where a developing country is lagging in one of these areas, foreign sources may play an important role in closing the gap (Park and Lippoldt, 2003). If inward trade, direct investment and licensing can be inﬂuenced by the strength of IPRs in an economy, then governments may be able to exploit IPR policy to enhance these ﬂows and stimulate development. Inﬂows of goods, direct investment and licences embody various...
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