Abstract:
This paper provides the first quantitative analysis of optimal patent policy in trading economies. We develop a new framework that combines trade and growth theory into a tractable quantitative model, which we estimate to fit patent and trade data. Counterfactual analysis yields three main results. First, potential gains from international cooperation over patent policies are large, but achieving them requires developed countries to provide stronger patent protection than developing economies. Second, existing policies only realize a small share of these gains. Third, by pushing towards policy harmonization, the TRIPS agreement hurts developing countries without generating significant global welfare gains.
