International Trade and Intellectual Property

TL;DR

This paper reviews three decades of evidence showing that stronger intellectual property rights influence international trade by increasing prices, expanding demand, and encouraging quality and innovation, with effects on trade patterns and foreign investment.

Contribution

It synthesizes extensive empirical evidence on how IP rights impact trade, highlighting the complex effects and identifying gaps for future research on enforcement and digital flows.

Findings

IP rights often boost trade along the extensive margin

Stronger IP rights redirect trade toward licensing and foreign investment

Policy and measurement gaps complicate causal inference

Abstract

Intellectual property (IP) rules have the potential to shape cross-border trade far more than their legalistic origins might suggest. Drawing on three decades of evidence, this review shows that stronger IP rights simultaneously create market-power forces that raise prices and market-expansion forces that broaden demand, while dynamic incentives spur quality upgrading and new export varieties. Micro-data and quasi-natural experiments after TRIPS reveal that IP most often boosts trade along the extensive margin and redirects some activity toward licensing and foreign investment. Policy bundling and measurement gaps on the strength of IP rights still cloud causal inference. Future work must map intangible flows and enforcement quality to capture the digital, data-driven frontier of international commerce.