Cross-border Patenting, Globalization, and Development

We build a model of cross-border patent filing, technology diffusion, and development. Our theory delivers a ‘structural gravity’ equation for cross-border patent flows that disentangles the effects of technology diffusion from policy-driven changes in IPR protection. To test the model’s predictions, we compile the International Patent and Citations across Sectors (INPACT-S) database that tracks patents within and between countries and industries over time. The econometric analysis reveals that while policy efforts have effectively promoted cross-border patent flows, the surge in patents from developed (North) to developing (South) countries between 1995 and 2018 was primarily driven by increased technology diffusion. A numerical analysis shows these North-South flows benefited both regions but generated larger gains in the South, thus reducing global income inequality.