Technology Transfer And Technology Policy In A Developing Country

Abstract

The transfer of technology from developed to the developing countries plays an important role in meeting the technological needs of the latter. A strict patent regime adopted by a developing country encourages the transfer of the latest technology from the developed world. At the same time however, such a regime impedes the spread of the technology within the developing country through spillovers. This paper examines the welfare effects of technology policy of a developing country, which depends on both the technology transferred as well as the spillover of knowledge from such transfers. Situating the model in a welfare maximizing framework, we show that there are gains as well as losses from a stricter patent regime, which underlines the case for an optimal technology policy that may involve a semi strong patent regime.