Patents and Growth : Empirical Evidence from the States

In the Uruguay Round, negotiators for the United States persuaded its trading partners to incorporate uniform minimum standards for the protection of intellectual property rights (IPRs) directly into the General Agreement on Tariffs and Trade. This paper addresses the question whether the agreement on Trade Related Aspects of Intellectual Property is a free trade initiative, defined as an agreement that is mutually beneficial to both net IPR exporters and net IPR importers, or mere rent-seeking by net IPR exporters. Using data from the forty-eight continental states and an augmented macroeconomic growth model, the paper demonstrates that within the uniformly high IPR regime present historically in the United States, patenting by a state's own residents (or internal patenting) was positively correlated with the state's per capita income, output, and growth rate. For initially wealthy states, active internal patenting tended to counter the slower growth that convergence would otherwise dictate. In contrast, patenting by the residents of other states (or external patenting) tended to reduce a state's per capita income, output, and growth rate