Journal Article

On welfare reducing technological change in a North-South framework

Hassan Benchekroun and Sharmila Vishwasrao

in Oxford Economic Papers

Volume 61, issue 3, pages 603-622
Published in print July 2009 | ISSN: 0030-7653
Published online November 2008 | e-ISSN: 1464-3812 | DOI: https://dx.doi.org/10.1093/oep/gpn036

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  • Technological Change; Research and Development
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Northern firms with patented technology can export goods to Southern markets and incur tariff costs or choose FDI and avoid the tariff. We examine the welfare effects of intellectual property protection under this scenario. When it is beneficial to do so, the Southern government offers patent protection in order to induce FDI. We find that a technological improvement in the North can reduce Southern welfare. After a technological improvement, the South still prefers that North does FDI, however longer patent protection may be required to induce FDI which can result in an overall decrease of Southern welfare. Given this immiserizing effect of technological change, Southern countries may choose to adopt higher cost technologies. We also show that a more effective technology does not necessarily require a longer patent protection to induce FDI.

Keywords: O14; O33; O34; F13; F23

Journal Article.  6868 words.  Illustrated.

Subjects: Technological Change; Research and Development ; International Trade ; International Factor Movements and International Business ; Economic Development