TITLE:
Intellectual Property Rights and Bilateral Intra-Industry Trade Flows: An Intuitive Framework
AUTHORS:
Nasser Al-Mawali
KEYWORDS:
Intellectual Property Rights (IPRs), Intra-Industry Trade (IIT)
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.8,
October
23,
2014
ABSTRACT: The intention of
this paper is to provide "for the first time" a conceptual framework
on how a level of IPRs is linked to bilateral intra-industry trade (IIT) flows.
The proposed analysis of the relationship between IPRs and IIT of this paper is
couched in a simple and intuitive framework that answers a positive question of
how intellectual property rights (IPRs-) induced market expansion, and market
power effects are related to the horizontal and vertical intra-industry trade
flows. The proposed intuitive framework introduces a demand-side approach and a
supply-side approach in explaining the link between IPRs and intra-industry
trade (IIT) flows. The supply-side approach explores how a country’s IPRs
affect its own exports (supply). In contrast, the demand-side approach examines
the effect a country’s IPRs have on its own imports (demand). The presented
conceptual framework of this paper provides intuitive evidence that in
determining bilateral intra-industry trade (IIT) flows in a two-country world,
the demand approach posits that bilateral trade flows may increase or decrease
due to improvements in IPRs in the importing destination country, while the
supply-side approach states that the bilateral trade flows may also increase or
decrease due to strong (high) IPRs in the exporting country. Furthermore, the
simultaneous effects of both supply and demand on bilateral intra-industry
trade flows are simultaneously needed in explaining the effects of strengthening
the level of the IPRs on bilateral intra-industry trade flows (IIT).