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Dynamic Gains from Trade Agreements with Intellectual Property Provisions

I develop a quantitative multi-country trade model of innovation and technology licensing to study the short- and long-term effects of trade agreements with intellectual property (IP) provisions. A trade agreement involves determining the level of tariffs and IP protection as Nash bargaining between a developed and a developing country. The agreement increases welfare, innovation, and growth in the long-run. However, gains accrue differently across countries along the transition. Developing countries experience short-run losses, as they now pay higher licensing prices. An agreement designed by a politically-motivated government could mitigate these losses, but at the expense of lower growth and welfare.

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https://doi.org/10.20955/wp.2021.010