Patent law, TRIPS, and economic growth: evidence from China

Abstract

We analyze the impact of intellectual property rights protection on factors contributing to China’s economic growth. We use a difference-in-difference estimation procedure and hold constant the effects of Deng Xiaoping’s South Trip and China’s accession to World Trade Organization. The null hypothesis that the 1992 and 2002 patent laws, including China’s adoption of Trade-Related Aspects of Intellectual Property Rights standards did not directly affect China’s productivity, inward foreign direct investment, or domestic research and development activity is not rejected.

Keywords:

• patent law
• intellectual property rights
• TRIPS
• TFP Growth

JEL Codes:

• O31
• O33
• O34

View correction statement:

Patent law, TRIPS, and economic growth: evidence from China

Acknowledgements

We have benefited from comments in seminars at Ohio State University and the LICOS Center for Institutions and Economic Performance, Katholieke Universiteit Leuven. We thank David Blau, Johan Swinnen, and Annelen Vandeplas for their insights, and we are especially grateful to Albert Guangzhou Hu and Gary Jefferson for their constructive comments on an earlier version of this paper. Keith Maskus has contributed valuable insights and corrections to the final version. Members of the Friday Working Group in the Ohio State Economics Department, Jesse Slater, Kerry Tan, Seonghoon Kim, and Kent Zhao endured endless discussions and made invaluable suggestions at many points in our research.

Notes

1. Another line of this contrarian scholarship points out that Northern countries have the option of protecting their R&D investments informally by making their technology more difficult to copy, which not only involves deadweight costs and reduction of R&D expenditure worldwide, but also reduces the profitability of imitation (and hence “free” technology transfer) by the South. This reaction can result in less efficient research technology and less Northern innovation than there would be under IPR protection (Taylor 1993, 1994; Yang and Maskus 2001).

2. It is possible that R&D returns to protecting technology are higher in low-tech provinces since they are further from the technological frontier.

3. The high-tech provinces, based on their R&D intensity ranking in the year 2000, are Zhejiang, Jilin, Guangdong-Hainan, Jiangsu, Beijing, Shanghai, and Tianjin, in ascending order. The proportion of high-tech industries in total provincial GDP in the high-tech group ranges from about 41 to nearly 80%. In the remaining provinces, the proportion of high-tech industrial output in provincial GDP ranges from about 5 to about 31%.

4. We refer to the OECD/IMF definition of FDI, which can be found at http://www.oecd.org/dataoecd/10/16/2090148.pdf

5. We focus on patent applications rather than patents granted because the lag between applications and grants is not fixed and thus makes it more difficult to specify meaningful lags in specifying structural relationships to be estimated. Awukose and Yin (in press) use patent applications as their principal measure of IPR protection in study of the impact of IPR protection on FDI in China.

6. We do not model the precise lags between the imposition of IPR legislation and the variables through which the legislation may impact productivity. For in depth discussion of this problem, see various papers by McGrattan and Prescott (2010 for example) and by Jorgenson, Ho, and Stiroh (2003 for example).

7. These provinces are defined in footnote 4.

8. Innovation patent applications receive much more intense scrutiny for validity than do applications for design patents (Hu and Jefferson 2009).