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Universally strong IPR protection and global welfare: A market-penetration perspective

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  • Poyago-Theotoky, Joanna
  • Tsai, Yingyi

Abstract

In a segmented trading environment with possible foreign penetration, we study market competition involving investment with cross-border differences in intellectual property rights (IPR) policy. While acknowledging that strong IPR promotes investment and facilitates the coverage in foreign markets where demand is much greater than that in the home market, we investigate a negative trade-off between the reduction in domestic welfare owing to business-stealing effect (BSE) and the increase in national welfare emerging from market-penetration effect (MPE), given host IPR policies. We show a partially (non-universally) strong IPR regime can nonetheless increase global welfare even when the MPE does not universally outweigh the BSE. This finding contrasts the arguments that strong IPR protection can improve welfare by reducing inequality in the long run and by increasing the effectiveness of knowledge spillovers.

Suggested Citation

  • Poyago-Theotoky, Joanna & Tsai, Yingyi, 2023. "Universally strong IPR protection and global welfare: A market-penetration perspective," Economic Modelling, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:ecmode:v:124:y:2023:i:c:s0264999323001360
    DOI: 10.1016/j.econmod.2023.106324
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    References listed on IDEAS

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    More about this item

    Keywords

    IPRs; Segmented markets; Market penetration; Business stealing; Investment;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • P4 - Political Economy and Comparative Economic Systems - - Other Economic Systems

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