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Economic Growth and Development: Role of Intellectual Property Rights

Many people understand the importance of economic development – for alleviating poverty, raising standards of living, and supporting our social, cultural, and political infrastructure – but the scholarly literature has diverse views on the factors that promote economic development. Traditional economic policies matter, such as policies regarding education, research and development, capital investment, essential services such as water and sanitation. But so do laws and institutions. This is where intellectual property rights (IPRs) matter for economic development. Technological progress is a critical driver of economic growth, and one of the key determinants of technological change is the incentives we provide technology developers to innovate and disseminate their innovations.

Furthermore, since economic development deals with not only poor economies but the interaction between rich (North) and poor (South) countries for purposes of stimulating investments in technology and transferring them to the developing world, IPRs have become prominent in global trade talks. Since the formation of the World Trade Organization in 1995, intellectual property laws have been reformed worldwide. These reforms have stirred much debate and controversy. Critics argue that IPRs raise the prices of technological goods to the developing world and seem to enrich companies in the North at the expense of consumers in the South. Proponents of IPRs point out that in the absence of IPRs, those consumers in the South may not get access to new knowledge goods (medicines, software, high-tech equipment, films). The proponents argue that, just as the benefits of free, open trade seem unconventional to protectionists who believe that it is necessary to protect their industries, the benefits of creating property rights for intellectual creations will seem unconventional to consumers of creative products who know that such goods that are intangible and do not requirement a payment to use (or share).

But the problem is that the debate about IPRs is not just about principles, but practice. In theory, IPRs may affect technological progress and contribute to global development, but the methods by which IPR policies have been implemented affect their effectiveness. For example, intellectual property rights are centered on a bargain. Within a country, IPRs grant the inventor or creator some market power for a temporary period of time as an incentive to innovate, enabling the rights holder to charge prices above competitive levels. In exchange, society enjoys the invention or creation, and once the IPRs expire, the invention or creation enters the ‘public domain’ for the rest of society to exploit non-exclusively. In practice, however, rights-holders (e.g., the pharmaceutical and motion pictures industries) have found ways to extend their market exclusivity. At the international level, global IPR reforms are also premised upon a mutually advantageous exchange. The countries in the North which own most of the world’s intellectual assets should gain from reduced piracy. In return, the South should gain by helping to attract technology transfers from the North, which is quite important for developing economies lacking domestic innovative capacities. Moreover, by better protecting their own IPRs, Southern countries could stimulate local innovation and catch up to the North. But again, in practice, substantive technology transfers to poor countries have not occurred – for example, those nations account for less than one-tenth of one percent of all technology licensing contracts – and Southern innovative and absorptive capacities are still severely weak.

Currently, these issues form the core of research on IPRs: how do IPRs influence innovation, technology diffusion, and economic development? Should policy regimes vary by stages of economic development? What is the appropriate design of an IPR system?

Park, Walter G. (2008), “Intellectual Property Rights and International Innovation,” in Keith Maskus (ed.) Frontiers of Economics and Globalization, Vol. 1, Handbook Series, Elsevier Science, 2008, pp. 289 - 327.

Park, Walter G. (2014), “Intellectual Property Rights and Economic Policy: 2000 - present” in Robert Wright and Tom Zeiler (eds.), Guide to U.S. Economic Policy, Chapter 25, New York: CQ Press.

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