Patents North South Trade And Global Growth

Lastly, we introduced an endogenous multi-nationalization process into a North-South model of scale-invariant long-run Schumpeterian growth with a finite-length patent protection. The latter is perfectly enforceable in the North but imperfectly enforceable in the South. The model was used to examine the effects of intellectual property rights policy and globalization on Foreign Direct Investment (FDI) and the world income distribution. The effectiveness of patent enforcement does not effect the decision of a firm to become MNCs. However, an increase in patent length reduces the flow of FDI and worsens the income distribution between regions. In addition, globalization, measured as a geographic expansion in the size of the South, increases the flow of FDI but worsens the North-South income distribution. Lastly, an improvement in innovation technology leads to a decline in FDI and worsens the North-South wage gap.