International intellectual property rights: Effects on growth, welfare and income inequality

Abstract

What are the effects of strengthening developing countries’ protection for intellectual property rights on economic growth and income inequality in the global economy? To analyze this question, we develop a two-country R&D-based growth model with wealth heterogeneity. In this growth-theoretic framework, we show that strengthening patent protection in either country increases economic growth and income inequality in both countries. Furthermore, we derive the Nash equilibrium level of patent breadth and find that it is sub-optimally low relative to globally optimal patent breadth due to the positive externality effects that are captured by a spillover parameter.