“R&D Subsidy, Intellectual Property Rights Protection, and North-South” by Kar-yiu WONG
This paper investigates the competition in technology and production between a firm in the North (developed country) and a firm in the South (developing country), and how such competition may be affected by North's subsidy on technology improvement and South's intellectural property rights (IPR) protection level. It is argued that allowing the North to choose the policy first could bring Pareto improvement. The paper also shows why requiring only the South to tighten its IPR protection without putting similar pressure on the North (as required by the TRIPS agreement) hurts the South. A more rewarding outcome exists if both the IPR protection level and the technology subsidy rate are chosen optimally. We point out that maximizing world welfare does not necessarily have to hurt the South, or to tighten the IPR protection in the South.