Globalization, intellectual property, and economic prosperity

Innovation and the adoption of new ideas is fundamental to economic progress, and so is free trade of goods and services. Here we examine the underlying economics of the market for ideas and its implications for trade. From a positive perspective, we examine how such markets function and how international trade interact with them. From a normative perspective, we examine the pitfalls of current intellectual property regulations, and how might they be improved. We highlight recent research by ourselves and others challenging the notion that government awards of monopoly through patents and copyright are "the way" to provide appropriate incentives for innovation. JEL Classification: X15, X16 This article is based on the text of the SER Invited Lecture delivered by Michele Boldrin at the 2003 Simposio de Análisis Económico (Seville). We thank National Science Foundation Grants SES 01-14147 and 03-14713 for financial support. Corresponding author: Michele Boldrin     

The NELS Curve: Replicating The Bell Curve Analyses with the National Education Longitudinal Study

This study uses the National Educational Longitudinal Study of 1988 (NELS) to replicate both the analysis in The Bell Curve and that of several of its previous replications. We examine the relative importance of test scores and family background in predicting dropping out of high school, starting college, arrests, and out-of-wedlock fertility. Our results relax several arbitrary assumptions made in The Bell Curve . We strongly reject The Bell Curve's conclusion that family background is almost always less important than test scores in predicting outcomes. In addition, our analysis casts doubt on some of The Bell Curve's claims concerning reverse discrimination in education.     

Strategic procurement, openness and market structure

We examine strategic procurement behaviour by governments and its effect on market structure in sectors, such as defence and pharmaceuticals, where the government is the dominant consumer. In a world economy with trade between producer countries, and between producers and non-producers, we use a modified Dixit–Stiglitz utility function with an independent taste for variety. There is free entry and exit by firms, but by anticipating their participation constraint governments can indirectly choose the number of domestic firms and their size through its choice of procurement price. Unlike the standard model with no independent taste for variety and no external sector of non-producer countries, there are incentives for subsidies, openness impacts on industrial structure and procurement coordination between producer countries affects firm numbers.     

Phases of imitation and innovation in a North-South endogenous growth model

A North-South endogenous growth model is developed to examinethree phases of Southern development: imitation of Northernproducts, imitation and innovation, and innovation only. Weshow that the three phases exist as possible equilibria whichdepend on knowledge spillovers and the ease of imitation. Applyingthe model to analyse the impact of R&D subsidies, thereare some clear policy implications: (I) the welfare effectsof subsidies in both blocs depend crucially on the Southernphase; (ii) there are circumstances where the global benefitsfrom subsidies to the South are so substantial as to be Pareto-improvingeven when fully financed by the North.     

The effects of diversity on business performance: Report of the diversity research network

This article summarizes the results and conclusions reached in studies of the relationships between race and gender diversity and business performance carried out in four large firms by a research consortium known as the Diversity Research Network. These researchers were asked by the BOLD Initiative to conduct this research to test arguments regarding the “business case” for diversity. Few positive or negative direct effects of diversity on performance were observed. Instead a number of different aspects of the organizational context and some group processes moderated diversity‐performance relationships. This suggests a more nuanced view of the “business case” for diversity may be appropriate. © 2003 Wiley Periodicals, Inc.     

Legal Theories of Financial Development

This paper examines legal theories of international differencesin financial development. The law and finance theory stressesthat legal traditions differ in terms of (i) their emphasison the rights of private property owners vis-à-vis thestate and (ii) their ability to adapt to changing commercialand financial conditions, so that historically determined legaltraditions shape financial development today. Other theoriesreject the centrality of legal tradition in accounting for cross-countrydifferences in financial development. The results are broadlyconsistent with legal theories of financial development, thoughit is difficult to identify the precise channel through whichlegal tradition influences financial development.     

GROWTH AND WELFARE EFFECTS OF WORLD MIGRATION

Using a two‐bloc endogenous growth model calibrated to two generic sending and receiving countries of equal size, we assess the growth and welfare impact of world migration flows of different skill compositions. The sending country (East) has a lower total factor productivity and a lower endowment of skilled labour. Migration can induce two growth‐enhancing effects: an efficiency effect from the more efficient use of labour in the receiving country (West) and a sectoral reallocation effect from a fall in the host country skilled–unskilled wage rates. Despite growth gains, there are both winners (migrants, the representative Western non‐migrant household) and losers (the representative Eastern household remaining). Remittances can see the latter group joining the winners.     

Partial information and volatility in a two-bloc world

This paper examines the effects of partial information on volatility and on the design of simple feedback rules in a rational expectations context. Previous studies have investigated these effects using small analytical models. Here we employ an empirical two-bloc model derived from the OECD Interlink model. The main conclusions are that when current asset prices are observed, but GDP is observed with a delay, then the effect on volatility is small, compared to the full information case. Likewise the choice of simple feedback rules is little affected, although a non-optimal use of information in their design may lead to a deterioration in performance.