Publication: Intellectual Property Rights, Licensing, and Innovation
Date
2003-02
ISSN
Published
2003-02
Author(s)
Guifang Yang
Maskus, Keith E.
Abstract
There is considerable debate in
economics literature on whether a decision by developing
countries to strengthen their protection of intellectual
property rights (IPRs) will increase or reduce their access
to modern technologies invented by industrial countries.
This access can be achieved through technology transfer of
various kinds, including foreign direct investment and
licensing. Licensing is the focus of this paper.To the
extent that inventing firms choose to act more
monopolistically and offer fewer technologies on the market,
stronger IPRs could reduce international technology flows.
However, to the extent that IPRs raise the returns to
innovation and licensing, these flows would expand. In
theory, the outcome depends on how IPRs affect several
variables-the costs of, and returns to, international
licensing; the wage advantage of workers in poor countries;
the innovation process in industrial countries; and the
amount of labor available for innovation and production. The
authors develop a theoretical model in which firms in the
North (industrial countries) innovate products of higher
quality levels and decide whether to produce in the North or
transfer production rights to the South (developing
countries) through licensing. Different quality levels of
each product are sold in equilibrium because of differences
in consumers' willingness-to-pay for quality
improvements. Contracting problems exist because the
inventors in the North must indicate to licensees in the
South whether their product is of higher or lower quality
and also prevent the licensees from copying the technology.
So, constraints in the model ensure that the equilibrium
flow of licensing higher-quality goods meets these
objectives. When the South strengthens its patent rights,
copying by licensees is made costlier but the returns to
licensing are increased. This change affects the dynamic
decisions regarding innovation and technology transfer,
which could rise or fall depending on market parameters,
including the labor available for research and production.
Results from the model show that the net effects depend on
the balance between profits made by the Northern licensor
and lower labor costs in the South. If the size of the labor
force used in Northern innovation compared with that used in
producing goods in both the North and South is sufficiently
small (a condition that accords with reality), stronger IPRs
in the South would lead to more licensing and innovation.
This change would also increase the Southern wage relative
to the Northern wage. So, in this model a decision by
developing countries to increase their patent rights would
expand global innovation and increase technology transfer.
This result is consistent with recent empirical evidence. It
should be noted that while the results suggest that
international agreements to strengthen IPRs should expand
global innovation and technology transfer through licensing,
the model cannot be used for welfare analysis. Thus, while
the developing countries enjoy more inward licensing, the
cost per license could be higher, and prices could also
rise, with an unclear overall effect on economic well-being.
Link to Data Set
Citation
“Guifang Yang; Maskus, Keith E.. 2003. Intellectual Property Rights, Licensing, and Innovation. Policy Research Working Paper;No. 2973. © World Bank, Washington, DC. http://hdl.handle.net/10986/19156 License: CC BY 3.0 IGO.”
Report Series
Report Series
Other publications in this report series
-
PublicationEffects of a Lottery Incentive on Sexually Transmitted Infections and HIV Incidence among Female Sex Workers in Tanzania: Results from the RESPECT II Randomized Trial(World Bank, Washington, DC, 2023-09-26)Female sex workers are a key population who experience a disproportionately high burden of HIV and sexually transmitted infections. A growing body of evidence suggests that financial incentives can reduce risky sexual behavior and the incidence of HIV and sexually transmitted infections; however, few studies have examined a lottery-based incentive mechanism or been conducted with female sex workers. This paper examines the effect of a lottery intervention on the combined incidence of HIV and herpes simplex virus 2 among female sex workers in Tanzania. The RESPECT II trial was an unmasked, two-arm, parallel group randomized controlled trial conducted in Dar es Salaam, Tanzania among 2,206 enrollees from 2018 to 2021. Participants were randomized in a one-to-one ratio to the basic test control group or to the lottery intervention group. The basic test group received testing and counseling for HIV and biweekly text messages with information on safe sex practices. The lottery group received the basic test group intervention plus entry into a weekly lottery with a 100,000 Tanzanian shilling (US$50) reward offered to 10 randomly selected participants, conditional on negative test results for syphilis and trichomonas. The primary outcome was combined HIV and herpes simplex virus 2 incidence after 36 months. The results showed no statistically significant effect on this primary outcome. Thus the study finds no evidence that the lottery-based incentives reduced the incidence of HIV and sexually transmitted infections among the female sex worker population. However, the results may have been affected by disruption from the COVID-19 pandemic, and unexpectedly high study attrition levels made it impossible to statistically rule out possible moderate-sized effects.
-
PublicationHow to Deal with Exchange Rate Risk in Infrastructure and Other Long-Lived Projects(World Bank, Washington, DC, 2023-09-19)Most developing economies rely on foreign capital to finance their infrastructure needs. These projects are usually structured as long-term (25–35 years) franchises that pay in local currency. If investors evaluate their returns in terms of foreign currency, exchange rate volatility introduces risk that may reduce the level of investment below what would be socially optimal. This paper proposes a mechanism with very general features that hedges exchange rate fluctuation by adjusting the concession period. Such mechanism does not imply additional costs to the government and could be offered as a zero-cost option to lenders and investors exposed to currency fluctuations. This general mechanism is illustrated with three alternative specifications and data from a 25-year highway franchise is used to simulate how they would play out in eight different countries that exhibit diverse exchange rate trajectories.
-
PublicationCorruption as a Push and Pull Factor of Migration Flows: Evidence from European Countries(World Bank, Washington, DC, 2023-09-14)Conclusive evidence on the relationship between corruption and migration has remained scant in the literature to date. Using data from 2008 to 2018 on bilateral migration flows across European Union and European Free Trade Association countries and four measures of corruption, this paper shows that corruption acts as both a push factor and a pull factor for migration patterns. Based on a gravity model, a one-unit increase in the corruption level in the origin country is associated with a 11 percent increase in out-migration. The same one-unit increase in the destination country is associated with a 10 percent decline in in-migration.
-
PublicationRebel with a Cause: Effects of a Gender Norms Intervention for Adolescents in Somalia(World Bank, Washington, DC, 2023-09-15)Gender inequality and restrictive norms are often reinforced and internalized during adolescence, influencing pivotal life choices. This paper presents results from a randomly-assigned gender norms intervention for young adolescents in Somalia that led to greater support for gender equality in reported attitudes among both girls and boys. In a novel lab-in-the-field experiment designed to observe social group dynamics, treated adolescents were also found to be less likely to succumb to peer pressure to conform when stating their gender attitudes in public. Perceptions of gender norms appears to shift for boys, leading to a greater public expression of gender egalitarian ideals. Furthermore, the findings show improved adolescent mental health, increased caring behavior towards siblings of the opposite sex, and a higher likelihood of involvement in household chores by boys. A complementary gender norms intervention for parents had limited marginal impact on the attitudes and behaviors of adolescents. The results suggest that gender norms interventions can be effective in influencing the attitudes and public discourse around gender equality, even in early adolescence.
-
PublicationGlobal Trends in Child Monetary Poverty According to International Poverty Lines(World Bank, Washington, DC, 2023-09-19)This paper analyzes extreme child poverty ($2.15/day poverty line) trends, as well as child poverty based on the higher international poverty lines of $3.65 and $6.85. The paper provides a trajectory of extreme child poverty (children living in extremely poor households) from 2013 to 2019 (based on the most recent surveys included in the Global Monitoring Database), complemented by nowcasting for 2020 to 2022. Children continue to be disproportionately affected by extreme poverty. Children who are younger than 18 years comprise more than 50 percent of those living in extreme poverty, although their share of the population is 31 percent. The paper estimates that in 2019, 15.8 percent of children in the world (319 million) younger than 18 years lived on less than $2.15 (2017 purchasing power parity) per day, as opposed to 6.6 percent of adults ages 18 and older. More recent “nowcasted” estimates suggest that at least 333 million children were expected to be living in extremely poor households in 2022, implying that 14 million more children were extremely poor in 2022 than in 2019. Following an increase in extreme child poverty at the height of the pandemic in 2020, nowcasted estimates show that the rate of extreme child poverty fell again in 2021 and 2022, but only at the slow rate of progress seen prior to the COVID-19 crisis. If the COVID-19 pandemic had not occurred, an estimated 79.7 million fewer children would have been living in extreme poverty between 2013 and 2022; however, the estimates suggest that the number of children living in extreme poverty decreased by 49.2 million, due to pandemic disruptions.