Intellectual Property Rights and Economic Development

INTELLECTUAL PROPERTY RIGHTS AND ECONOMIC DEVELOPMENT

Revised Draft: February 6, 2000

Prepared for the series “Beyond the Treaties: A Symposium on Compliance with International Intellectual Property Law”, organized by Fredrick K. Cox International Law Center at Case Western Reserve University.

ABSTRACT:

This paper provides an analytical overview of how economic development may be promoted or hindered by an effective system of intellectual property rights (IPRS). IPRS can play a positive role in encouraging new business development, rationalization of inefficient industry, and inducing technology acquisition and creation. They may harm development prospects by raising the costs of imitation and permitting monopolistic behavior by owners of IPRS. The potential gains and losses depend on the competitive structure of markets and the efficiency of related business regulation, including aspects of competition policy and technology development policy. The paper reviews available empirical evidence on these issues. The evidence supports the view that product innovation is sensitive to IPRS in developing countries, while FDI and technology transfer go up when patent rights are strengthened. Overall, there is a positive impact on growth, but this impact depends on the competitive nature of the economy. The paper concludes by putting forward suggestions for integrated policy reforms.

1. Introduction

The question of how intellectual property rights (IPRS) affect the processes of economic development and growth is complex and based on multiple variables. The effectiveness of IPRS in this regard depends considerably on particular circumstances in each country. While economists are devoting more attention to this issue, evidence to date is fragmented and somewhat contradictory, in part because many of the concepts involved are not readily measured. As I discuss below, stronger systems for protecting intellectual property could...