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Measuring the welfare effects of intellectual property rights changes on the Korean pharmaceutical industry: the case of Korea–US Free Trade Agreement

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  • Keun-Yeob Oh
  • Taegi Kim

Abstract

This paper shows how to measure the welfare effects of intellectual property rights (IPR) changes under the Korea–US Free Trade Agreement (FTA) on the Korean economy. After the FTA, patent lifetimes are expected to be extended. During such extension periods, Korean generic drug makers will not be able to sell their drugs, and consumers will have to pay more because of higher prices. The new concepts of effective patent term and price-change mechanism were employed, and patent data for the Korean pharmaceutical industry were used to estimate the parameters needed to measure the welfare effects. The empirical results indicate that the welfare effect will be much smaller than suggested by previous studies. These methods to evaluate the welfare effects can be applied to the cases of other recent FTAs and other kinds of IPR negotiations in international economics.

Suggested Citation

  • Keun-Yeob Oh & Taegi Kim, 2012. "Measuring the welfare effects of intellectual property rights changes on the Korean pharmaceutical industry: the case of Korea–US Free Trade Agreement," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 19(3), pages 278-291.
    • Handle: RePEc:taf:raaexx:v:19:y:2012:i:3:p:278-291
    DOI: 10.1080/16081625.2012.667385
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