Dynamic Gains from Trade Agreements with Intellectual Property Provisions

I develop a quantitative multi-country trade model of innovation and technology licensing to study the short-and long-term effects of trade agreements with intellectual property (IP) provisions.A trade agreement involves determining the level of tariffs and IP protection as Nash bargaining between a developed and a developing country.The agreement increases welfare, innovation, and growth in the long-run.However, gains accrue differently across countries along the transition.Developing countries experience short-run losses, as they now pay higher licensing prices.An agreement designed by a politically-motivated government could mitigate these losses, but at the expense of lower growth and welfare.