A north–south model of intellectual property rights protection and skill accumulation

Abstract

This paper examines how stronger intellectual property rights (IPR) protection in the south affects the processes of R&D investment, technology transfer and skill accumulation. It finds that stronger IPR protection has only a temporary impact on the innovation rate while it has a negative impact on the long-run imitation rate. In the north, the impact on the process of skill accumulation is negative and increases the within-country wage inequality. In the south, the impact is ambiguous and depends on the externality that skill accumulation generates on the process of education. In addition, the paper shows that skills play a crucial role in attracting FDI inflows, and strengthening IPR protection may be ineffective in attracting technological knowledge when the level of local skill is low.