PATENTS, APPROPRIATE TECHNOLOGY, AND NORTH SOUTH TRADE

We consider the incentives of the North and the South to provide patent protection to innovating firms in the North. The two regions are assumed to have different distributions of preferences over the range of exploitable technologies. Owing to the scarcity of R&D resources, the two regions must compete with each other to encourage the development of technologies most suited to their needs. This provides a motive for the South to protect patent rights even when it constitutes a small share of the world market and has strong free-riding incentives otherwise.