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This paper uses a simple model of invention and patent protection to examine the welfare effects of extending patent protection from the country where invention takes place to another country that is only a consumer of invented products. It is shown that, while the welfare of the inventing country certainly rises with the extension of patent protection, that of the other country probably falls, and may well fall by more than the increase in welfare of the inventing country. In particular, as patent protection is extended to a larger and larger portion of the world, the effect on the welfare of the world as a whole of extending it to the rest of the world becomes negative. Copyright 1992 by The London School of Economics and Political Science.
Alan V. Deardorff (Sat,) studied this question.