Effects of IP Protection on Export of Knowledge-Intensive Business Services – US and EU Evidence.

Abstract

We investigate the impact of intellectual property protection on exports of services (with a special attention to knowledge-intensive business services) from the US to the EU (27 countries) and rest of the world (36 countries) in 2000-2010.

We separately assessed EU member countries because the EU and the US are currently negotiating the TTIP agreement leading to the creation of the largest free trade area. EU15 and US altogether account for about two thirds of global KIBS exports, which makes them the most important players in international turnover in these services.

We construct a gravity model of bilateral trade flows that includes standard dependent variables, measuring the “economic masses” of countries and economic distance between them. In our model we built a specific variable: the threat of imitation. It is a dummy variable expressing the level of IPR protection (measured by Ginarte and Park Index) and imitation abilities (with human capital index as a proxy) in the importing country. We investigate empirically the occurrence of market size effects (Maskus, Penubarti 1995), as the theory does not provide definite answer whether more stringent IP regulations increase or decrease trade.

Keywords: Knowledge-intensive business services, IP protection, gravity model

JEL Classification: F14, F21