Patents, North-South trade and global growth

We developed a North-South model with global patent protection in the presence of trade costs. The model generated endogenous Schumpeterian growth and product-cycle trade. The first model was used to analyze the effects of globalization through trade liberalization and a geographic expansion in the size of the South. A reduction in trade costs worsens the North-South income inequality by increasing the wage-gap between the two regions. Globalization has an ambiguous effect on the steady-state rate of technology transfer and has no effect on either innovation or the growth rate.;Next, we built a simple general-equilibrium model of scale-invariant long-run Schumpeterian (R&D) growth, finite-length patents, and endogenous patent enforcement policies. The latter were captured by a probability function which depends on the government resources engaged in the enforcement of patents granted to firms that discover new higher-quality products. An increase in the patent length raises the probability of patent enforcement; this result is consistent with cross country evidence showing that patent enforcement and patent duration are complements. In addition, the model predicted that economies with low productivity of R&D researchers have weaker patent enforcement policies and lower long-run Schumpeterian growth.;Lastly, we introduced an endogenous multi-nationalization process into a North-South model of scale-invariant long-run Schumpeterian growth with a finite-length patent protection. The latter is perfectly enforceable in the North but imperfectly enforceable in the South. The model was used to examine the effects of intellectual property rights policy and globalization on Foreign Direct Investment (FDI) and the world income distribution. The effectiveness of patent enforcement does not effect the decision of a firm to become MNCs. However, an increase in patent length reduces the flow of FDI and worsens the income distribution between regions. In addition, globalization, measured as a geographic expansion in the size of the South, increases the flow of FDI but worsens the North-South income distribution. Lastly, an improvement in innovation technology leads to a decline in FDI and worsens the North-South wage gap.