Trading Ideas between Countries

Monday, April 17, 2017

Property rights
Thinkstock/designer491

By Ana Maria Santacreu, Economist

We live in a world in which countries have become highly interconnected through production linkages, international trade and knowledge flows. The increase in the exchange of ideas around the world has been facilitated by these interactions.

In a very interlinked world, protecting locally developed ideas is important for promoting innovation. Several countries have adopted policies aimed at increasing intellectual property rights, such as patents, trademarks and copyrights. These intellectual property rights can be traded across countries.

The Organization for Economic Cooperation and Development (OECD) collects data on these cross-country transactions. In particular, it collects data on “payments and receipts between residents and nonresidents for the authorized use of proprietary rights (such as patents, trademarks, copyrights, industrial processes and designs including trade secrets, and franchises).”

The figure below shows those data for royalty receipts as a percentage of gross domestic product (GDP), for a sample of OECD countries in 2014. It also shows data on research and development (R&D) intensity for the same countries in 2014.1,2 Both variables are in logs.

Trading Property Rights

We observed a strong positive correlation between royalty income received and R&D intensity, which reflects innovative activity in the country.

Mexico and Chile have low R&D intensity and receive less income in royalties. Switzerland, Sweden, Finland and the U.S. are very innovative countries. That is, they have high R&D intensity and receive large royalty income. Intellectual property rights are strong in these countries, and this promotes higher innovative activity.

At the same time, the fact that nonresidents are paying income to be able to use the patents and trademarks developed in these innovative countries reflects the existence of the exchange of ideas and knowledge flows from these countries to the rest of the world.

Policies aimed at strengthening intellectual property rights in a country help to promote innovation, while facilitating the exchange of ideas around the world.

Notes and References

1 R&D intensity is expressed as R&D spending as a percentage of GDP. These data reflect that “expenditures for research and development are current and capital expenditures (both public and private) on creative work undertaken systematically to increase knowledge, including knowledge of humanity, culture, and society, and the use of knowledge for new applications. R&D covers basic research, applied research, and experimental development.”

2 References to data sources: Research and development expenditure (% of GDP) (United Nations Educational, Scientific, and Cultural Organization [UNESCO] Institute for Statistics). Charges for the use of intellectual property, receipts (World Bank World Development Indicators). GDP (World Bank WDI).

Additional Resources

Posted In OutputTrade  |  Tagged ana maria santacreuproperty rightsresearch and developmentroyalty incometrade
Commenting Policy: We encourage comments and discussions on our posts, even those that disagree with conclusions, if they are done in a respectful and courteous manner. All comments posted to our blog go through a moderator, so they won't appear immediately after being submitted. We reserve the right to remove or not publish inappropriate comments. This includes, but is not limited to, comments that are:
  • Vulgar, obscene, profane or otherwise disrespectful or discourteous
  • For commercial use, including spam
  • Threatening, harassing or constituting personal attacks
  • Violating copyright or otherwise infringing on third-party rights
  • Off-topic or significantly political
The St. Louis Fed will only respond to comments if we are clarifying a point. Comments are limited to 1,500 characters, so please edit your thinking before posting. While you will retain all of your ownership rights in any comment you submit, posting comments means you grant the St. Louis Fed the royalty-free right, in perpetuity, to use, reproduce, distribute, alter and/or display them, and the St. Louis Fed will be free to use any ideas, concepts, artwork, inventions, developments, suggestions or techniques embodied in your comments for any purpose whatsoever, with or without attribution, and without compensation to you. You will also waive all moral rights you may have in any comment you submit.
comments powered by Disqus

The St. Louis Fed uses Disqus software for the comment functionality on this blog. You can read the Disqus privacy policy. Disqus uses cookies and third party cookies. To learn more about these cookies and how to disable them, please see this article.

Subscribe to
On the Economy

Get notified when new content is available on our On the Economy blog.

Subscribe

Feedspot blog award

The On the Economy blog recently ranked in the top 20 on Feedspot’s list of top bank blogs.

About the Blog

The St. Louis Fed On the Economy blog features relevant commentary, analysis, research and data from our economists and other St. Louis Fed experts.


Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

Contact Us

For media-related questions, email mediainquiries@stls.frb.org. For all other blog-related questions or comments, email on-the-economy@stls.frb.org.

Categories