are corporate tax rates or countries converging abstract the statutory rate and effective tax rate imposed on corporation income as well as the dispersion of these rates began to decline in the 1980s is this due to changes in the domestic determinants of corporate taxation or increases in international pressures for tax competition this paper finds clear evidence that the corporate tax rate is insulated from a country s revenue needs across countries there is no association of the expenditure gdp ratio with the corporate statutory rate and only weak evidence of a positive association with the average rate there is suggestive but not definitive evidence that the domestic role of the corporate tax as a backstop to the individual income tax is important across countries there is indeed a strong association between the top individual rate and the top statutory corporate rate there is intriguing evidence about the role of international competitive pressures on corporate taxation measures of openness are negatively associated with statutory corporate rates although not with revenues collected as a fraction of gdp strikingly larger more trade intensive countries do collect more corporate tax but this may be because these countries are more attractive venues for investment

corporate taxation in the oecd in a wider context against the background of increased globalisation statutory corporate tax rates have shown a clear downward trend over the last two decades the sharp decline in these rates was accompanied by substantial tax base broadening and a comparable reduction in personal income tax rates only until the early 1990s this suggests that corporate tax competition is of increasing importance so far corporate tax revenues remain fairly stable but an analysis of corporate taxation in the context of the overall tax systems shows that a substantial shift towards value added taxes has taken place while the trends so far have been driven by smaller european countries recent tax reforms indicate that increasing tax competition is inducing a shift towards consumption even for larger economies

an exploration of the forward premium puzzle in currency markets a standard empirical finding is that expected changes in exchange rates and interest rate differentials across countries are negatively related implying that uncovered interest rate parity is violated in the data this article provides new empirical evidence that suggests that violations of uncovered interest rate parity and its economic implications depend on the sign of the interest rate differentially a framework related to term structure models is developed to account for the puzzling relationship between expected changes in exchange rates and interest rate differentials estimation results suggest that a particular term structure model can account for the puzzling empirical evidence article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the relative importance of aggregate and sector specific shocks at explaining aggregate and sectoral fluctuations abstract in this note we present a simple exercise aimed at disentangling the sectoral and aggregate effects of both aggregate and sector specific shocks we construct a structural multi sectoral model of the economy and show that after several hypotheses estimation of such structural model by vector auto regressions var is possible the most important assumption that we use is that sector specific shocks have no contemporaneous effects on sectors other than the sector where they originate although we do not exclude that they have some effects on the former sectors after some lag we estimate the model using monthly u s data the industrial production index so that the latter assumption is not to strong our results suggest that the aggregate effects of sector specific shocks are not large but on the other hand their sectoral effects dominate the sectoral effects of aggregate shocks

the new political economy of taxation in advanced capitalist democracies earlier versions of this paper were presented at the 1999 annual meeting of the american political science association september 1 5 atlanta ga and the 2000 annual meeting of the midwest political science association april 27 30 chicago il the authors thank steffen ganghof philip genschel mark hallerberg alex hicks william keech dennis quinn and the anonymous reviewers and editor of this journal for many helpful comments and dennis quinn for generously sharing data duane swank thanks the german marshal fund of the united states and marquette university for support of work incorporated in this paper data utilized in this paper are available from duane swank marquette edu

behind the recent surge of chinese patenting an institutional view abstract this paper examines a number of forces that have possibly contributed to the explosive growth of chinese patenting over the past decade after a review of previous hypotheses and conventional wisdom this study proposes an additional explanation and argues that patent subsidy programs implemented by each provincial region have played an important role in the growth of chinese patenting this institutional change taking place at the province level has induced an increase in patent propensity among not only firms universities and research institutes but also individuals empirical evidence based on publicly available data provides solid support for this argument it was also found that a larger fraction of applications are granted patent rights since the implementation of such programs suggesting that reduction in patent application quality may not be a serious concern unless the criteria used for patent examination have been lowered

labor market regulation the diversity of knowledge and skill and national innovation performance abstract the diversity of knowledge and skill is an important element of a national system of innovation we propose a theory of how certain labor market institutions affect diversity and through that route affect levels of innovation specifically unemployment protection up encourages diversity by reducing the risk burden of a broad range of learning or human capital investment for that reason up fosters innovation employment protection ep reduces the risk burden of a much narrower range of learning for this reason it will not enhance diversity to the extent up does and it may actually depress overall diversity and innovation our approach differs from previous research on labor market insurance and skill formation much of which has dealt with a distinction between general and specific skills and which has treated the effects of up and ep as similar estimating the effects of up and ep on patenting for 25 oecd countries over 24 years we find a positive effect from up a negative effect from ep and evidence that the up effect is mediated by diversity of skill

dynamics of china s provincial level specialization in strategic emerging industries this paper examines the dynamics of technological specialization in strategic emerging industries seis within each of mainland china s 31 provinces and the likely effectiveness based on the experiences of taiwan and south korea of the provinces strategies for developing these industries grounded in economic decentralization theories the empirical method employed includes analyzing the scores on an sei specialization promotion index per each province alongside several analytics of invention patent data from each province in the seven seis newly designated by the central level government as of 2010 the data is quantitatively analyzed according to four groups of indicators based on the following specialization relevant concepts comparative advantages and technological capabilities economy size and income technological uncertainty and lifecycles and latecomer entry into complex technologies where knowledge is most cumulative the analysis finds that china s system of economic decentralization has partially worked to ensure provincial industrial policymaking is effective whereby a notable number of provinces are seemingly pursuing sei development strategies in terms of sei selection and promotion that may enable catch up however paradoxically at the same time the system appears to sometimes facilitate provincial sei development strategies that are quite risky or even likely ineffective

currency fluctuations in the post bretton woods era the international monetary landscape that has emerged since the felling of bretton woods is characterized by a hybrid exchange rate system that lies somewhere between the textbook polar cases of a gold standard and a pure float this system has relatively flexible exchange rates between major countries active central bank intervention in the market for the major currencies and predominantly fixed exchange rates relative to the dollar or to some basket of currencies for less developed countries and newly industrializing nations the majority of research on currency markets since the early 1970s has focused on the characteristics of flexible exchange rates under this hybrid regime my thesis is that this research has been unsuccessful the proportion of monthly or quarterly exchange rate changes that current models can explain is essentially zero even after the fact forecasts that use actual values instead of forecasted values of the explanatory variables cannot explain major currency movements over the post bretton woods era this result is quite surprising since exchange rate changes would be entirely unpredictable only in very special cases of the theoretical models discussed as the discussion below will argue it is not a general implication of market efficiency that exchange rates follow a random walk process 1

corporate tax systems multinational enterprises and economic integration abstract multinational firms are known to shift profits and countries are known to compete over shifty profits two major principles for corporate taxation are separate accounting sa and formula apportionment fa these two principles have very different qualities when it comes to preventing profit shifting and preserving national tax autonomy most oecd countries use sa in this paper we show that a reduction in trade barriers lowers equilibrium corporate taxes under sa but leads to higher taxes under fa from a welfare point of view the choice of tax principle is shown to depend on the degree of economic integration

modeling agricultural innovation in a rapidly developing country the case of chinese pesticide industry technology and innovation play an increasingly important role in the economic development of both developed and developing countries we investigate how policy and market factors influence firms or other potential inventors decisions on innovation or imitation by developing a model that emphasizes expected market size appropriability and technological opportunity we empirically test the model using provincial pesticide innovation data from a rapidly developing country china we find that the government encouraged local innovation by opening regions to more international trade by increasing investments in public research and education and by strengthening intellectual property right ipr enforcement to meet its wto trips obligations moreover while ipr enforcement and increases in market size are important in encouraging innovation empirical evidence is mixed as inventors respond to these factors differently policies to increase expected market size could increase copying rather than inducing r d investments and extended patent life may reinforce the original standing of infringers as well as inventors

adopting knowledge from reverse innovations transnational patents and signaling from an emerging economy is there knowledge adoption of innovations from emerging economies we theorize that to help overcome information asymmetry across countries granting patents to technology in the emerging economy of china can serve as a signal of technology potential and market opportunity to enhance technological knowledge adoption in a developed economy such as the united states the effect may be greater in a complex technology sector with high information asymmetry than in a discrete technology sector and in regions with less developed market intermediaries where information asymmetry is high our difference in differences estimates using 4226 china u s patent dyads and comparable u s patents support our hypotheses

state led technological development a case of china s nanotechnology development summary we analyze nanotechnology patent applications filed in china from 1998 to 2008 and find that the extraordinary pace of nanotechnology development achieved over that period has been promoted primarily by the public sector rather than being driven by industry and market forces this finding implies that developing countries such as china with public research capacity and commitment to technological development can make rapid progress in basic research in emerging technologies but it remains uncertain whether and when local industry can benefit from public r d investment enough to enable active development of indigenous innovation

the politics of 1992 fiscal policy and european integration the internal market in europe will greatly increase the international mobility of resources how will this affect fiscal policy in different countries we consider taxation of capital in a two country model where a democratically chosen government in each country chooses tax policy higher capital mobility changes the politico economic equilibrium in two ways on the one hand it leads to more tax competition between the countries this economic effect tends to lower tax rates in both countries on the other hand it alters voters preferences and makes them elect a different government this political effect offsets the increased tax competition although not completely

international trends in technological progress evidence from patent citations 1980 2011 we analyse cross country trends in several aspects of technological progress during 1980 2011 by examining the us patent citations data our estimation results on patent quality and citation lags relative to the us reveal the following the emerging asian economies of korea taiwan and china have achieved substantial catch up in the case of korea and taiwan progress has been made in both patent quality and citation lags china has achieved improvement in patent quality but not in citation lag in contrast advanced economies of europe and japan have displayed steady decline in patent quality while the us has strengthened its position

pricing foreign currency options under stochastic interest rates abstract in this paper we build a general framework to price contingent claims on foreign currencies using the heath et al 1987 model of the term structure closed form solutions are obtained for european options on currencies and currency futures assuming that the volatility functions determining the term structure are deterministic as such this paper provides an example of a bond price process for both the domestic and foreign economies consistent with grabbe s 1983 formulation of the same problem

tax competition and tax coordination in a median voter model this paper analyzes the welfare effects of capital tax coordination in a simple model of fiscal competition where fiscal policy is subject to majority voting and households differ with respect to their labor and capital income it turns out that a coordinated capital tax increase may raise or reduce welfare depending on the relative magnitude of i economic distortions induced by a labor tax and ii political distortions resulting from the influence of the median voter on fiscal policy decisions a negative welfare effect is more likely the smaller the marginal excess burden of the labor tax and the smaller the ratio of the median voter s labor income to average labor income we also use empirical estimates of the marginal excess burden of taxation to determine the welfare effects of tax coordination it turns out that a negative welfare effect of coordinated tax increases may emerge in our model for empirically reasonable parameters

ownership and firm innovation in a transition economy evidence from china we examine innovation performance of firms in a transition economy from an ownership perspective we focus specifically on the relationship between ownership structures and firm innovation performance drawing on data from 548 chinese firms we find volume of patent registration to be most strongly influenced by foreign ownership in the firm along with firm affiliation within a business group the influence of state and institutional ownership on innovation performance is positive but lagged contrary to expectations insider ownership leads to lower innovation performance and concentrated ownership has no significant impact our study has two principal contributions firstly we utilize a comprehensive treatment of ownership characteristics overcoming weakness in previous studies that have used a more narrow focus on ownership type secondly we contribute to understanding of how firms in transition economies build indigenous capabilities for innovation by drawing attention to the interplay of foreign and domestic control of agents innovation

how do patent laws influence innovation evidence from nineteenth century world fairs studies of innovation have focused on the effects of patent laws on the number of innovations but have ignored effects on the direction of technological change this paper introduces a new dataset of close to fifteen thousand innovations at the crystal palace world s fair in 1851 and at the centennial exhibition in 1876 to examine the effects of patent laws on the direction of innovation the paper tests the following argument if innovative activity is motivated by expected profits and if the effectiveness of patent protection varies across industries then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective analyses of exhibition data for 12 countries in 1851 and 10 countries in 1876 indicate that inventors in countries without patent laws focused on a small set of industries where patents were less important while innovation in countries with patent laws appears to be much more diversified these findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries jel d2 k11 l51 no 014

the heterogeneous effect of software patents on expected returns evidence from india we contribute to the literature on the role of patenting for economic development by analyzing the impact of patent protection for software in india we find that a proposed broadening of patent eligibility to include software in 2004 had a large positive effect on average returns for listed software companies in india an unanticipated reversal of this proposed policy change in 2005 resulted in substantial negative returns we illustrate substantial heterogeneity in the dynamics of these effects across the sequence of events we also find smaller firms to have been systematically and most significantly affected by the tightening of patent law with regard to software patents

tax structure and government expenditures with tax equity concerns abstract we augment a standard tax model by concerns about tax equity people get upset when labour is taxed more heavily than capital even the slightest concern for tax equity invalidates the common tenet that capital remains tax exempt in small open economies this holds for exogenous as well as for endogenous government expenditures and irrespective of whether concerns with tax equity only cause emotional discomfort or also impact on work incentives if concerns with tax equity get more intense the economy may choose higher taxes on labour and move to the downward sloped part of its laffer curve for endogenous government spending stronger concerns with tax equity may lead to a larger size of the public sector

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

asymmetric tax competition abstract the paper analyzes nash equilibrium when two jurisdictions set tax rates on a tax base which is mobile between them population differences imply tax differences the smaller jurisdiction levies a lower tax rate in equilibrium and its residents are better off than those in the larger jurisdiction the nash equilibrium is inefficient if the two jurisdictions merged the resulting allocation would be efficient however if differences in population are great enough residents of the small jurisdiction would be made worse off by such a merger

analyzing the evidence of an ipr take off in china and india abstract both china and india have been experiencing a historical take off in the use of intellectual property rights ipr in terms of trademark applications filed with domestic ip offices in 2009 the evidence demonstrates that china now ranks 1st worldwide and india 5th while for patent filings china ranks 3rd worldwide and india ranks 9th this performance is remarkable as both china and india experienced negligible demand for ipr protection as recently as two decades ago the ipr take up trends in these two countries are analyzed in detail highlighting the structure of patent and trademark demand since 1990 specifically the available series are broken down and analyzed according to i national versus foreign origin of patents and trademarks ii technological ipc and trademark nice classes and iii the major individual patent users in each country the data used refers to applications in the chinese and indian ip offices although the demand from residents of these two countries in both the international and other national systems is also assessed beyond the existing momentum in ipr registrations by china and india and their capacity to maintain it into the near future the paper addresses practical questions about the strategies motives and benefits behind the current trends in particular we seek to evaluate the capacity of both china s and india s national innovation systems to internalize the potential returns of this increasing demand for ipr the insight reached finds that should both china and india sustain their current ipr growth rates they will be able to catch up with the most advanced economies within the time span of a few decades

a great wall of patents what is behind china s recent patent explosion abstract china s patent surge documented in this paper is seemingly paradoxical given the country s weak record of protecting intellectual property rights using a firm level data set that spans the population of china s large and medium size industrial enterprises this paper explores the factors that account for china s rising patent activity while the intensification of research and development in the chinese economy tracks with patenting activity it explains only a fraction of the patent explosion the growth of foreign direct investment in china is prompting chinese firms to file for more patent applications amendments to the patent law that favor patent holders and ownership reform that has clarified the assignment of property rights also emerge as significant sources of china s patent boom these results are robust to alternative estimation strategies that account for over dispersion in the patent counts data and firm heterogeneity

economic integration and the relationship between profit and wage taxes this paper analyzes the development of the ratio of corporate taxes to wage taxes using a simple political economy model with workers and capitalists that own internationally mobile and immobile firms among other results our model predicts that countries reduce their corporate tax rate relative to the wage tax when preferences for public goods increase or when the share of capital employed in multinational firms is rising we further show how an increase in the wage share changes both the relative size of tax bases and the political influence of different income groups the predicted relationships are tested using panel data for 23 oecd countries for the period 1980 through 2004 the results of the empirical analysis support our main hypotheses

did oil prices trigger an innovation burst in biofuels abstract this paper documents an innovation burst in biofuels in the second half of the years 2000s and empirically confronts it to the massive variations of oil prices between 1985 and 2009 our results show that increases in oil prices greatly spurred innovation in biofuels the elasticity of the number of patent families in biofuels with respect to oil prices is greater than 1 and holds both at the country and at the firm level we find that the effect cannot be caused by the contagion of oil prices to cereal prices an important input for biofuels similarly we find that the effect is very specific no such effect is found substituting oil prices with electricity prices or substituting biofuel patents with biotechnology or environment related patents delving into applicants sectors suggests that specialized biofuel firms were less responsive to oil price variations than diversified firms

new pills for poor people empirical evidence after gatt abstract the protection of pharmaceutical innovations is being dramatically extended as much of the developing world introduces patent protection for new drug products this change in intellectual property rights may lead to more research on drugs to address developing country needs we use new survey data from india the results of interviews and measures of research and development r d constructed from a variety of statistical sources to determine trends in the allocation of research to products specific to developing country markets there is some although limited evidence of an increase in the mid to late 1980s which appears to have leveled off in the 1990s the picture presented provides a baseline against which future patterns in research activity can be compared

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

how do foreign firms patent in emerging economies with weak appropriability regimes archetypes and motives abstract foreign firms patent in emerging economies with weak appropriability regimes at an increasing rate this phenomenon constitutes a paradox since in such a setting foreign firms should have weak incentives to patent in an attempt to resolve this paradox we conducted an inductive analysis of 11 foreign firms that patent in such a setting using the case of china as our empirical context we identify four archetypes of foreign firms and three key antecedents the interaction of which determines which archetype a firm can be subsumed under our study complements the developed economy focus of the extant appropriation literature by adding an international perspective we extend previous econometric studies by identifying salient factors on the firm level that determine the extent to which a foreign firm patents in emerging economies with a weak appropriability regime highlighting that the extent of a firm s motivation to maintain its freedom to operate can supersede imitability concerns we also comment on the practical implications of these contributions for managers of foreign firms highlighting a structural conflict of interest between foreign firms from developed economies and the development goals of an emerging economy we point to the generalizability of our results to a wide range of other emerging economies worldwide

exchange rates and interest rates can term structure models explain currency movements abstract we construct an international term structure model that has excellent empirical performance in tracking movements of exchange rates and currency returns the forward premium puzzle is accounted for yet the model does not have the undesirable properties found in backus et al j finance 56 2001 279 examination of the estimated factor structure indicates that local factors are not important in the us uk and german markets moreover we find that term structure factors alone cannot satisfactorily explain exchange rate movements in other words exchange rates are also affected by other factors that are not in the interest rate dynamics

political influence economic interests and endogenous tax structure in a computable equilibrium framework with application to the united states 1973 and 1983 we consider the properties of a computable equilibrium model ofa competitive political economy in which the economic interestsof groups of voters and their effective influence on equilibriumpolicy outcomes can be explicitely distinguished and computed the model incorporates an amended version of the gemtap taxmodel calibrated to data for the united states for 1973 and1983 emphasis is placed on how the aggregation of gemtaphouseholds into homogeneous groups affects the numericalrepresentation of interests and influence for representativemembers of each group

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

knowledge flows in the solar photovoltaic industry insights from patenting by taiwan korea and china abstract in this paper we extend work previously undertaken in industries such as semiconductor and flat panel displays to investigate knowledge flows from advanced countries us japan and europe to catch up follower countries taiwan korea and china this time in the emergent solar photovoltaic industry the solar photovoltaic industry is of particular interest in that it is poised between exploitation of first generation crystalline silicon technologies and new thin film and organic compound technologies thus providing distinct sources of knowledge flow as measured by patent citations and linkage for this study we deploy a new database of 19 105 solar photovoltaic patents taken out by taiwan korea and china at the uspto over the 24 years 1984 2008 and analyse the knowledge flows revealed in these patents using a set of 12 international patent classification technology categories that we constructed we demonstrate commonalities in patterns of knowledge flow between solar photovoltaic and earlier industries but also suggestive differences such as rising dependence of the catch up countries on their own intra national knowledge generation and flow indicating their shift from imitation to innovation

how tame will leviathan become in institutional competition competition among governments in the provision of public goods this article critically examines thehypothesis of brennan and buchanan that competition amonggovernments in the provision of publicgoods can serve as a substitute forconstitutional constraints on governments since leviathan type governments withfree choice of tax instruments will be ableto escape competitive pressure by shiftingtaxes to immobile factors one could thinkof a rule of competition which prohibitstaxes on immobile factors indeed such arule leads to a nash equilibriumwhere the tax burden lies on the mobilefactor however net income of the citizensmay or may not increase as a result fromsuch a rule depending on a number ofvariables presented in this article acomplete substitution of constitutionalconstraints by the rule of competition may depending on the same variables evendecrease net income moreover somepotential for increases in net income maybe forgone since capital allocation andthe supply of public goods will usually beinefficient in equilibrium finally applying the rule in a real worldenvironment will be difficult and may evenlead to further serious inefficiencies forthese reasons such a rule will hardly everbe introduced hence competition amonggovernments cannot be viewed as a propersubstitute for constitutional constraints whoever is afraid of leviathan shouldthus not rely on competition amonggovernments alone

explorations into factors explaining money market returns in this article we measure and interpret the common factors that describe money market returns results are presented for both three and four factor models we find that the three factor model explains on average 86 percent of the total variation in most money market returns while the four factor model explains on average 90 percent of this variation using mimicking portfolios we provide an interpretation of the systematic risks represented by these factors in this article we attempt to measure and interpret the common factors that describe money market returns the factor approach we employ assumes that the covariance matrix of a set of random variables in this case excess returns can be decomposed into common or systematic components and idiosyncratic or nonsystematic components this decomposition into systematic and nonsystematic components is based on an assumption of a linear relationship between the returns of each security and a set of common factors this is the assumption of linear return generating models which form an integral part of the structure of many asset pricing theories for example arbitrage pricing theory apt as developed by ross 1976 the interpretation is that the common factors represent sources of systematic or nondiversifiable risk and the idiosyncratic component of returns represents diversifiable risks our focus here is not on testing a particular asset pricing model per se but on developing empirical evidence for the existence of stylized facts regarding money market returns the stylized facts take the form of the existence measurement and interpretation of the common factors that are found in money markets our attempt to measure and interpret these sources of systematic risk may eventually lead to the construction of observable eco

china as number one evidence from china s most recent patenting surge abstract china overtook the u s in 2011 to become the country filing the largest number of patent applications has china s patenting ascendancy been propelled by chinese firms increasing technological sophistication or their much greater propensity to seek patents using a unique and never before used data set where the state intellectual property office sipo patent records have been matched to their applicant firms by sipo we differentiate the two potential explanations by estimating a patent production function and by relating a firm s patents in force to its labor productivity our main findings are 1 while the patenting surge has been an across the board phenomenon most of the growth has come from the extensive margin of growth firms that were not actively applying for patents in the past 2 the correlation between patents and r d and that between patents and labor productivity have become weaker particularly for utility models and for the extensive margin of growth these results suggest that non innovation related motives for acquiring patents may have played an important role in the patenting surge

stage dependent intellectual property rights inspired by the chinese experience we develop a schumpeterian growth model of distance to frontier in which economic growth in the developing country is driven by domestic innovation as well as imitation and transfer of foreign technologies through foreign direct investment we show that optimal intellectual property rights ipr protection is stage dependent at an early stage of development the country implements weak ipr protection to facilitate imitation at a later stage of development the country implements strong ipr protection to encourage domestic innovation therefore the growth maximizing and welfare maximizing levels of patent strength increase as the country evolves towards the world technology frontier and this dynamic pattern is consistent with the actual evolution of patent strength in china

interpreting the forward premium anomaly one of the central issues in international finance concerns the forward premium anomaly changes in spot exchange rates are inversely related to the premium of forward rates over spot rates the authors construct a numerical example of a theoretical economy with this property and discuss its potential as an explanation of the anomaly