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Abstract

Intellectual property protection has long been recognized as a fundamental determinant of innovation and economic growth, and weak rights in developing countries are one of the significant barriers to the takeoff of their economy. Taking countries’ reactions to the Agreement on Trade-Related Aspects of Intellectual Property Rights as an experiment, I examine this linkage by exploiting within-country variation in the growth of industries’ value-added in a context with overall increasing intellectual property protection. Specifically, I ask whether industrial sectors that are more in need of R&D developed faster in developing countries that had raised their intellectual property strength to a relatively higher level in accordance with the Agreement. I find this to be true in a sample of up to 22 industries in 38 countries during 2000-2005. I show this result is unlikely driven by the reverse causality or other confounders, and my findings are robust to alternative measures of industrial R&D intensity.

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