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A two-country model of endogenous growth is employed to assess the importance of intellectual property rights to trade, growth, and technology transfer. The paper provides theoretical results linking the intellectual property rights regime to trade patterns, aggregate R&D, worldwide growth, and aggregate welfare measures. Failure to provide patent protection for foreign-made innovations forces innovators to employ less than the best practice research technologies, reduces aggregate R&D activities worldwide, effectively eliminates technology transfer across countries, and reduces worldwide growth.
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M. Scott Taylor (1994) studied this question.
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