Trade and intellectual property rights as channels for economic growth

This paper investigates two prominent potential drivers of long-run economic growth: a country's trade regime and its intellectual property rights (IPR) regime, as well as their interaction. We characterize the combination of these policy-driven regimes as a country's technology development regime. To test the importance of our specification of the technology regime, the paper derives a parsimonious model for testing their impact on the growth of living standards. The empirical analysis is conducted using a panel of 24 developed countries and 78 developing countries spanning 1980-2005. Our estimates highlight the importance of the technology development regime variables in driving the growth of gross domestic product per capita. In particular, the IPR regime stands out for its direct impact on growth and as a channel through which trade interacts to impact growth. The results support the view that a country's graduating into the ranks of higher income status may require that both IPR and trade regimes, particularly the former, be well developed.