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Fact of the Week: Cross-Border Patenting Would Have Been 43 Percent Lower Without Globalization

Fact of the Week: Cross-Border Patenting Would Have Been 43 Percent Lower Without Globalization

February 26, 2024

Source: Jesse LaBelle et al., “Cross-border Patenting, Globalization, and Development,” Working Papers, Federal Reserve Bank of St. Louis, no. 2023-031 (December 2023).

Commentary: A new working paper by Jesse LaBelle et al. analyzed the important role of patenting in international development. In particular, the study aimed to analyze the effect of cross-border patenting on development of the Global South, which typically refers collectively to Latin America, Africa, the Middle East, and South and Southeast Asia. The data came from the author’s newly-created INPACT-S database, which they constructed from the PATSTAT database, for the period between 1995 and 2019.

The authors analyzed the trends and effects of cross-border patenting using counterfactual analysis. When looking at the role of globalization since 1995, the authors estimate that cross-border patenting from the Global North to the Global South would have been about 43 percent lower in the absence of globalization. Such a decrease in cross-border patenting would have had significant implications for international development. As the authors note, cross-border patenting enables the transfer of new technologies and their associated knowledge between countries. Both of these are more essential than ever to fostering growth in low-income countries, given the role of high-tech innovation in the modern economy. The study highlights these benefits to the Global South in the analysis of welfare gains, measured by consumption. Specifically, consumer welfare in the Global North and the Global South since 2001 would have been about 2.3 percent lower and 4.5 percent lower, respectively, absent the trends in patent transfer from the North to the South. This suggests that the South has made greater welfare gains than the North, and also represents a decrease in the gap in incomes between the two regions due to the patenting trends over that period.

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