Trade-Related Intellectual Property Rights: Theory and Empirics

The WTO inspired strengthening of intellectual property rights (IPRs) in developing countries remains highly controversial even 15 years after the 1994 TRIPs agreement. This paper employs both theory and empirics to assess how a strengthening of IPRs affects international technology diffusion by altering the volume of high-tech exports into developing countries. In the context of a North-South general equilibrium model,stronger IPRs encourage Northern firms to introduce new high-tech products in the South. High-tech exports to the South rise, while low-tech exports may fall. International technology diffusion does not necessarily fall. These theoretical predictions are examined empirically. On average,developing countries that strengthened their IPRs under the TRIPs agreement saw an increase of approximately $50 billion (1994 US dollars) in their high-tech imports. This amount is equivalent to a 13% increase in their annual value of high-tech imports.