The gravity model can explain the bilateral inter-country payment flows by currency very well. The economic sizes of the origin and destination countries significantly and positively affect bilateral payment flow denominated in any given currency, while distance and other factors that increase...

This paper develops a monopolistic competition model of multiproductfirms to explain the effect of trade liberalization on the product mix of multiproductexporting firms. The model shows that input-tariff reduction leads to increasesin a firm’s export values, especially for products that are...

In this online appendix, we discuss extensions to our model of patent exhaustion. Section A.1 examines how the patent owner's incentive to invest in product quality (a proxy for the overall ex ante innovation) in a regime of presumptive exhaustion compares to a regime of absolute exhaustion. In...

Price controls create opportunities for international arbitrage. Many have argued that such arbitrage, if tolerated, will undermine intellectual property rights and dull the incentives for investment in research-intensive industries such as pharmaceuticals. We challenge this orthodox view and...

This paper develops a growth model aimed at understanding the effects of globalization of production on rate of innovation, distribution of labor income between the North and South and welfare of workers in both regions. We adopt a dynamic general equilibrium product cycle model, assuming that...

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, in their capacities for innovation and in their absolute and comparative advantage in...