Abstract
This study investigates the effects of intellectual property rights (IPR) protection on economies by proposing a three-pole global economy model. The main proposition of the study is that the classical two-pole approach (north–south) does not reflect the technological heterogeneity and conflicts within the developing world. Therefore, a three-pole world economy model which consists of the following regions has been designed; the north which innovates the northern products, the east which innovates the eastern products and also tries to imitate the northern products, and lastly, the south which tries to imitate both the eastern products and the northern products that have been already imitated by the east. Thus, the model suggests a world system depending on global imitation chains. The numeric simulation results reveal firstly, the northern region benefits from tighter IPR policies in any case; secondly, stronger protection of IPR certainly exerts negative effects in the south while it brings benefits the eastern region in a way that highlights the main contribution of the paper.
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Notes
However, the number of imitator firms may decrease if IPR protection become permanently stronger. In such a case, the number of southern imitation firms will asymptotically converge to zero in time, or the imitation sector of the East might be destroyed. Alternatively, in a “fishing out” case as given in the Romerian setup, the number of new ideas and firms might be a decreasing function of the existing ideas. Then, the fully-endogenous, or as a newer approach, the hybrid method of Cozzi (2017a, b) will serve the purpose. However, we assume that fishing-out case is excluded. Further research may consider these facts and improve this literature.
Notice that the south can imitate the northern high-technology products only via the eastern reverse engineering channel as it seen from Fig. 1. Thus, there is an indirect mechanism for the northern product imitation of the South.
As Grossman and Helpman (1991) assumes.
The Eq. (26) can be proved as follows;Previously the firm (project) values have been defined as \(v_{i} = w_{i} ag/N^{\theta }\). If we take the logarithm of both sides in this equation, we will get \(log(v_{i} ) = \log (w_{i} ) + \log (a) + \log (g) - \theta { \log }(N)\); which can also be written in the growth rates form as \(\frac{{\dot{v}_{i} }}{{v_{i} }} = \frac{{\dot{w}_{i} }}{{w_{i} }} + \frac{{\dot{a}}}{a} + \frac{{\dot{g}}}{g} - \theta \frac{{\dot{N}}}{N}\). Their growth rates will be equal to zero as \(w\), \(a\) and \(g\) are constant, and we will obtain the remaining part of the equation \(\left( { - \theta \frac{{\dot{N}}}{N}} \right)\); or \(\left( { - \theta g} \right)\).
In Eq. (33), the denominator shows that \(m_{EN}\) decreases as \(m_{SN}\) increases. This outcome appears to be reasonable since there is a certain amount of northern product in the system and some of them are imitated by the South while some of them are imitated by the East. If the share of northern product imitation of the South increases, there would remain lower amount of northern product imitation of the East. The nominator exhibits increase in \(m_{EN}\) in response to increase in \(m_{SE}\). In other words, northern product imitation of the East increases as eastern product imitation of the South increases. This mechanism can be traced out of Eq. (36), indicating the southern/eastern relative wage rate. This equation suggests that (\(w_{S}\)/\(w_{E}\)) increases due to increases in \(m_{SE}\). In other words, eastern wage rate decreases as against that of the South. Lower wage rates imply lower imitation costs for the East, and thus, \(m_{EN}\) increases. Because the \(m_{SE}\) term is not the only determinant of the \(m_{EN}\), there might be even inverse tendencies caused by the other factors such as \(m_{SN}\).
Lorenczik and Newiak (2012) have also focused on the threshold value of the IPR protection level and found that in such a system IPR protection level varies around \(5 \mp 2\).
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The authors are grateful to two anonymous reviewers for their invaluable comments and critiques which have greatly contributed to the improvement of the earlier version of this paper.
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Demir, C., Lenger, A. Intellectual property rights and global imitation chains: the north–south–east model. Econ Polit 36, 549–569 (2019). https://doi.org/10.1007/s40888-019-00148-6
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DOI: https://doi.org/10.1007/s40888-019-00148-6