Intellectual property rights and skills accumulation: A product-cycle model of FDI and outsourcing

•We study the effects of stronger IPR protection on patterns of production.•It raises the extent of outsourcing and reduces the extent of FDI.•It raises the proportion of unskilled Southerners and mitigates wage inequality.•It raises the proportion of skilled Northerners and Northern wage inequality...

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Bibliographic Details
Published in:Journal of macroeconomics 2015-12, Vol.46, p.328-343
Main Author: Chen, Hung-Ju
Format: Article
Language:English
Subjects:
Equilibrium
FDI
Foreign direct investment
Foreign investment
Inequality
Intellectual property
Outsourcing
Quality ladder
Skill
Studies
Subcontracting
Wage differential
Wage inequality
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Summary:•We study the effects of stronger IPR protection on patterns of production.•It raises the extent of outsourcing and reduces the extent of FDI.•It raises the proportion of unskilled Southerners and mitigates wage inequality.•It raises the proportion of skilled Northerners and Northern wage inequality.•The effects of international specialization and R&D cost are also examined. This study investigates the effects of stronger intellectual property rights (IPR) protection in the South on innovation, skills accumulation, wage inequality, and patterns of production based on a North–South general-equilibrium model with foreign direct investment (FDI) and international outsourcing. We find that stronger Southern IPR protection raises the extent of outsourcing and reduces the extent of FDI. This increases the proportion of unskilled Southerners and mitigates Southern wage inequality. In the North, stronger Southern IPR protection raises the proportion of skilled Northerners and wage inequality. The effects of international specialization, R&D cost, and Northern population are also examined.
ISSN:0164-0704
1873-152X
DOI:10.1016/j.jmacro.2015.10.008