INNOVATION, IMITATION, AND INTELLECTUAL PROPERTY-RIGHTS

The debate between the North and the South about the enforcement of in tellectual property rights is examined within a dynamic general equili brium framework in which the North invents new products and the South imitates them. A welfare evaluation of a policy of tighter intellectua l property rights is provided by decomposing the welfare change into f our items: (a) terms of trade; (b) production composition; (c) availab le products; and (d) intertemporal allocation of consumption. The pape r provides a theoretical evaluation of the effect of each one of these items and their relative size. The analysis proceeds in stages. It be gins with an exogenous rate of innovation in order to focus on the fir st two elements. The following two components are added by endogenizin g the rate of innovation. Finally, the paper considers the role of for eign direct investment.