Welfare Effects of Intellectual Property Rights UnderAsymmetric Spillovers

We develop a model with one innovating northern firm and several heterogeneousSouthern firms that compete in a final product market. We assume the southern firms differ intheir ability to adapt technology and use this heterogeneity to study the differing incentives ofsouthern governments to protect intellectual property rights. We find that governmentsrepresenting more efficient firms have greater incentive to protect IPR than do those representingless efficient firms. However, efficiency considerations imply that, given policies resulting inthe same overall innovation rate, it would be better to have weaker IPR protection for the moreefficient southern firms.[...]