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The role of IPRs on prices, wages and growth in a two country directed technical change model

Óscar Afonso
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  • University of Porto, Faculty of Economics, CEFAGE-UBI, and OBEGEF, Rua Dr. Roberto Frias, 4200–464 Porto, Portugal
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Published Online: 2017-08-24 | DOI: https://doi.org/10.1515/bejm-2017-0070


We develop a two country, Innovator and Follower, directed technical change model between tradable and nontradable sectors. The Innovator performs innovative R&D. The Follower imitates, in a pre-trade context, and adopts, in a trade scenario, the available technological knowledge. We start by considering the pre-trade context and then we analyze the trade scenario. In both regimes – imitation and adoption – and in BGP, international IPRs protection, R&D productivity, scale-effects intensity and substitutability between sectors determine the stable and unique worldwide economic growth rate and the technological-knowledge bias, which, in turn, affects relative prices and wages. Depending on IPRs protection, imitation and adoption can either amplify or slow down the technological-knowledge bias and thus the real exchange rate, the wage inequality and the worldwide growth rate. For example, under technological-knowledge adoption with positive international IPRs protection and substitutability, wages tend to be higher in the Innovator, technological knowledge and intra-country wage inequality are biased towards the tradable sector, and the real exchange rate accommodates the Balassa-Samuelson proposal.

Keywords: directed technological change; international trade; intellectual property rights; scale effects; prices; wages; economic growth

JEL Classification: O30; O41; F10; F43; J31


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Published Online: 2017-08-24

Citation Information: The B.E. Journal of Macroeconomics, 20170070, ISSN (Online) 1935-1690, DOI: https://doi.org/10.1515/bejm-2017-0070.

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