This paper develops an open economy growth model in which firm heterogeneity increases the gains from trade. Technology spillovers from incumbent firms to entrants cause the productivity threshold for firm survival to grow over time as competition becomes tougher. By raising the profits of...

Intellectual property rights are a recurrent source of tensions between developed and developing economies. This paper provides the first quantitative analysis of optimal patent policy in trading economies. We develop a new model of trade, growth and patenting in which patent protection affects...