Abstract
This article builds a model of cumulative growth in order to analyze the relationship between intellectual property rights (IPRs) and economic growth in 38 countries from 1980 to 2005. The analysis focuses on the impacts of IPRs on the growth gap between countries using a catch-up model and USPTO database. The empirical results show that the strengthening of IPRs has a positive impact on innovation in developed and developing countries in Asia, while we fail to find evidence in Latin America. Secondly, similar to assertions made by De Long and Summers (1991) and Dowrick and Nguyen (1989), investment in fixed capital plays a critical role in growth gap dynamics. What needs to be emphasized here is the cumulative causal relationship between investment and growth: investment in fixed capital improves productivity and encourages economic growth thereby triggering even more investment. This paper confirms that the strengthening of IPRs and investment in fixed capital contribute to the widening of the economic development gap for the 1980–2005 period.
Highlights
In the last several decades the nature of the world economy has changed dramatically
In the first equation of Model (1), which tests the general impact of intellectual property rights (IPRs) on innovation, our results show that the investment in fixed capital and the technological change represented by the number of patents have been the factors determining economic growth for the last 25 years
The estimation using data on patent applications by residents shows the following results, which are similar to ours that uses foreign patents filed in the US (Appendix V). (i) In Model (1), in which differences in economic development are not considered, it fails to prove that IPR protection accelerates technological innovation; (ii) When differences in economic development are taken into account, the results show that IPR protection boosts technological innovation in developed countries, but this is not the case for developing countries; (iii) When the model considers regional differences among developing countries, the results confirm that IPR protection has a positive impact on technological innovation in Asia, but we fail to prove it for developing economies in South America
Summary
In the last several decades the nature of the world economy has changed dramatically. It is feared that the knowledge gap will increase the growth gap and income inequality between developed and developing countries as the world economy moves toward a more global and knowledge-based economy. The remaining 86% of the world’s population produces only 6% of US utility patents. Sub-Saharan Africa, excluding the Republic of South Africa, has roughly 600 million people, but has only produced in total 1–3 patents in recent years. The growth gap between Asian countries and the US, measured by the percentage of its per capita GDP to the US, is 23% of the US, while the knowledge gap, measured by the number of patents per 1,000 people, is only 16.1% of the US.
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