Macroeconomic Issues and Policy
The issues of IPRs, innovation, and growth are clearly not solely national issues. Chapter 9 discussed how innovation is related to globalization. This chapter deepens this discussion in a number of areas and stresses the policy issues. One of the most important and controversial aspects of globalization is TRIPS, which is short for the Agreement on TradeRelated Aspects of Intellectual Property Rights. The legal and economic issues involved in TRIPS are complex and are still not fully understood. This chapter reviews these issues with a specific focus on the economic aspects of the debate. A major conclusion is that TRIPS affects economies in different ways. Since a few rich countries generate and own most of the world's IPRs, it was expected that the introduction of TRIPS would increase net royalty payments to these rich countries. Less expected was the fact that even among the other countries there can be different effects depending on their income level and other characteristics.
Before the discussion of TRIPS, section 12.2 asks what macroeconomic evidence there is that strong IPRs are conducive to economic growth. There is a range of economic studies that attempt to test whether countries with strong IPRs experience higher economic growth. This is a difficult question to answer, not least because economists do not have reliable models of economic growth (see chapter 8). The results of the research indicate that strong IPRs can, at times, have positive associations with economic growth.1 In particular, in order to benefit from strong IPRs a country needs to have a range of other, conducive factors. A further indication from historical studies is that the strength of IPRs may affect the nature of innovation in a country rather than the level of innovation. This result reflects the microeconomic evidence that firms can rely on trade secrecy at times and on IPRs at others. Section 12.3
1 The word “associations” is used here since statistical analysis can only indicate, but
not prove, causality.