HOW TRADE-RELATED ARE INTELLECTUAL PROPERTY-RIGHTS

There is little empirical evidence about whether differing international levels of patent protection influence trade flows. If a nation strengthens its patent laws it could experience higher or lower imports. We specify an empirical model in which deviations of bilateral sectoral imports from anticipated levels are related to income, trade barriers, and patent laws. Patent regulations in the importing country are corrected for endogeneity through the use of instrumental variables. The results of the final equations indicate that increasing patent protection has a positive impact on bilateral manufacturing imports into both small and large developing economies.