Patents and Growth: Empirical Evidence from the States
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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. Although individual countries may adopt higher standards for protection, the agreement on Trade Related Aspects of Intellectual Property Rights ("TRIPs") imposed on all countries the fairly high standards of protection then existing in only a relative handful of countries. Proponents of TRIPs argue that the agreement is trade-related and will prove to mutually enhance the welfare of countries that are net exporters of IPR goods, as well as countries that are net-IPR goods importers. Opponents contend that the measure was mere rent-seeking by the United States and will prove beneficial only to countries that are net-IPR exporters. This paper uses the United States as a natural experiment in an attempt to cast some light on this debate. The United States has provided uniform federal patent protection since 1790, yet the patenting activity across states has varied considerably. The residents of some states patent more; the residents of other states patent less. Using a macroeconomic model to explain variations in state economic performance, this paper finds that, within a regime of uniform patent protection, patenting by the residents of other states (or "external patenting") has a positive correlation with a state's per capita income and gross domestic product. Moreover, when the states are broken down into quartiles based upon their levels of patenting activity, the correlation becomes more positive for states in the lower patenting quartiles.
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