Intellectual property rights violations and spillovers in North-South trade

The article examines the role of technological spillovers when Northern and Southern firms compete in quantities on the common world market and when only the Northern firm is supposed to conduct innovative activity. The intensity of spillovers is interpreted as an indicator of the strength of intellectual property rights (IPR) protection. In this light, the paper reconsiders the questions raised in the recent economic analysis of IPR protection in North-South relations: when and whether the Southern countries benefit, in welfare terms, from protecting IPR; how the North fares in this story; how large is the conflict between the North and South; and what is the optimal level of IPR protection at the world level. The paper shows that the common belief that the South generally benefits from relaxing IPR protection while the North is worse off does not carry over in the applied duopoly model with spillovers. In this respect, the congruence of interests between North and South, with respect to Southern IPR protection regime, should not be an exceptional or even impossible state of affairs. (C) 1998 Elsevier Science B.V. All rights reserved.