Working Paper: NBER ID: w15393
Authors: Lee Branstetter; Kamal Saggi
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.
Keywords: Intellectual Property Rights; Foreign Direct Investment; Industrial Development
JEL Codes: F23; F43; O31; O34; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Strengthening IPR protection (O34) | Rate of imitation (C59) |
| Rate of imitation (C59) | FDI flow (F21) |
| FDI flow (F21) | South's share of global production (F62) |
| Strengthening IPR protection (O34) | Real wages of Southern workers (J31) |