DP6460 Intellectual Property Provisions in North-South Trade Agreements
Using a repeated game approach, this paper models a North-South trade agreement under which North offers South improved market access (via a tariff reduction) if South agrees to prevent local imitation by strengthening its protection of intellectual property rights (IPRs). We show that such an agreement arises in equilibrium if South's imitative capacity is neither too high nor too low. The paper also considers a scenario where Southern protection of IPRs is induced via a North-South transfer. A comparison of the two instruments shows that one instrument does not unambiguously dominate the other in terms of sustaining cooperation. We also analyze whether and how the availability of the second instrument affects cooperation given that one instrument is already available.