Patents, Innovation, and Imitation in a North-South Model with Increasing Product Variety

38 Pages Posted: 16 Feb 2024

See all articles by Ut Meng Ho

Ut Meng Ho

University of Edinburgh

Yibai Yang

University of Macau - Department of Economics

Date Written: January 30, 2024

Abstract

This paper develops a North-South variety expansion model to explore the cross-country effects of patent protection on the relative wage, innovation, technology transfer, and welfare. Firms in the North perform R&D for innovation, whereas firms in the South perform R&D for technology transfer through imitation. We find that strengthening northern patent protection raises the relative wage between the North and the South permanently, decreases the rate of technology transfer permanently, and increases the northern innovation rate temporarily. In contrast, strengthening southern patent protection reduces the relative wage permanently, increases the rate of technology transfer permanently, and increases the northern innovation rate temporarily. Moreover, this model is calibrated to the the US-China data to perform a quantitative analysis. When a country strengthens patent protection unilaterally, the welfare of their citizens increases. Nevertheless, when both countries strengthen patent protection bilaterally by the same magnitude, the South benefits from welfare gain and the North suffers from welfare loss.

Keywords: Innovation; Patent Protection; R&D; Technology Transfer

JEL Classification: F43; O33; O34; O40

Suggested Citation

Ho, Ut Meng and Yang, Yibai, Patents, Innovation, and Imitation in a North-South Model with Increasing Product Variety (January 30, 2024). Available at SSRN: https://ssrn.com/abstract=4710095 or http://dx.doi.org/10.2139/ssrn.4710095

Ut Meng Ho

University of Edinburgh ( email )

Yibai Yang (Contact Author)

University of Macau - Department of Economics ( email )

Macau
China

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