Do intellectual property rights play a role in the economic growth of petro-states?: Some empirical evidence from the GCC countries

Abstract

The existing literature on the relationship between the strength of a country’s intellectual property rights and rate of growth is still inconclusive. The previous studies on IPRs and economic growth, although quite comprehensive, overlooked the resource-based economies. The role of IPRs in innovation and economic growth in the GCC is expected to be different from that in non-resource-based economies, this is because that the resource-based economies of GCC countries exhibit the characteristics of the “rentier states”. The present study contributes to the ongoing debate over the relationship between intellectual property rights (IPRs) protection and economic growth by providing new empirical evidence from the Gulf Co-operation Council (GCC) petro-states, namely Saudi Arabia, Oman, Bahrain, United Arab Emirates (UAE), Kuwait and Qatar. The present study employs the basic determinants of economic growth as postulated by various economic growth theories and then augmented with measurement of IPRs. To ensure the robustness of the empirical results, the study employs three different approaches of estimations: constant coefficient approach (ordinary least squares (OLS)), the fixed effects approach, and the between effects approach. The analyses in this study utilizes panel data from cross-sectional data on all GCC countries over a span of six years (2008 to 2013). The IPRs index used in this study was developed in 2007 by Property Rights Alliance (USA). All other explanatory variables (initial GDP per capita, inflation, human capital, population, openness, and investment) are from the World Bank’s World Development Indicators (2012). The empirical findings confirm the expectations relating to “traditional” sources of economic growth. However, what is important is that the study does not find any empirical validations with respect to the role of IPRs in promoting economic growth in the GCC petro-states. The study also did not find that stronger IPRs protection in GCC countries reduces economic growth, as the variable of IPRs has a positive sign but is not statistically significant in the three specified models of the study. The insignificant relationship between IPRs and economic growth in the case of GCC countries might be related to the fact that GCC countries are “rentier states” in which IPRs per se are not sufficient to ensure technological progress and innovations. The results suggests that for IPRs to promote innovations and economic growth, a coherent set of complementary policies are required, and that the governments of the GCC countries need to play a positive role in inducing technology acquisition and creation.