Innovation And Imitation: Effects Of Intellectual Property Rights In A Product-Cycle Model Of Skills Accumulation

This paper analyzes the effects of stronger intellectual property rights (IPR) protection in the South on innovation, imitation, the pattern of production and wage inequality based on a North-South product-cycle model with foreign direct investment (FDI) and skills accumulation. This quality-ladder model features innovative R&D in the North and imitative R&D in the South. Two types of innovation are considered: innovation targeting all products and innovation targeting only imitated products. We find that for both types of innovation, strengthening IPR protection reduces the innovation rate and raises the imitation rate. There is also an increase in the proportion of Northern unskilled labor and a decrease in Northern wage inequality. As for the pattern of production, the extent of FDI may decrease while the extent of Northern production may increase. (This abstract was borrowed from another version of this item.)