We construct a tractable general equilibrium model of cumulative innovation and growth, in which new ideas strictly improve upon frontier technologies, and productivity improvements are drawn in a stochastic manner. The presence of positive knowledge spillovers implies that the decentralized...

This paper analyzes the setting of national patent policies in the global economy. In the standard model with free trade and social-welfare-maximizing governments à la Grossman and Lai (2004), cross-border positive policy externalities induce individual countries to select patent strengths that...

In this paper, we merge the heterogenous firm trade model of Melitz (2003) with the Ricardian model of Dornbusch, Fisher and Samuelson (DFS 1977) to explain how the pattern of international specialization and trade is determined by the interaction of comparative advantage, economies of scale,...

The literature on trade liberalization has recently shifted its attention from trade liberalization in imported final goods to studying the effects of trade liberalization in imported intermediate inputs. This emphasis fits very well the trade liberalization experience of China following its...

The doctrine of "patent exhaustion" implies that the authorized sale of patented goods "exhausts" the patent rights in the goods sold and precludes additional license fees from downstream buyers. This paper offers the first formal economic model of domestic patent exhaustion that incorporates...

On May 30, 2017, the Supreme Court held that the initial authorized sale of a patented item within or outside the U.S. "exhausts" all rights of the patentee to that item under the Patent Act. This decision goes against the Government’s position that a foreign sale authorized by the U.S....

We study the incentives that governments have to protect intellectual property in a trading world economy. We consider a world economy with ongoing innovation in two countries that differ in market size and in their capacities for innovation. We associate the strength of IPR protection with the...

This paper examines the relationship between the credit constraints faced by a firm and the unit value prices of its exports. The paper modifies Arkolakis's (2010) model of trade with heterogeneous firms by introducing endogenous quality and credit constraints. The model predicts that tighter...

We present a theory to explain government procrastination as a consequence of its present-bias resulting from the political uncertainty in a two-party political system. We show that under a two-party political system the party in office tends to be present-biased. This may lead to inefficient...

What has been the overall global welfare impact of the accession to the World Trade Organization of a large country like China, or the global welfare impact of the completion of the Uruguay round of GATT negotiations? Can we come up with a simple user-friendly formula to calculate the global...