You are on page 1of 11

Journal of Policy Modeling 30 (2008) 725735

Available online at www.sciencedirect.com


Globalization and income inequality: Implications for
intellectual property rights
Samuel Adams

Ghana Institute of Management and Public Administration, P.O. Box AH 50, Achimota, Accra, Ghana
Received 15 June 2007; received in revised form 17 September 2007; accepted 20 October 2007
Available online 15 January 2008
Abstract
This paper examines the impact of globalization on income inequality for a cross-section of 62 developing
countries over a period of 17 years (19852001). The results of the study indicate that globalization explains
only 15% of the variance in income inequality. More specically, the results show that (1) strengthening
intellectual property rights and openness are positively correlated with income inequality; (2) foreign direct
investment is negative and signicantly correlated with income inequality but this is not robust to different
model specications; (3) the institutional infrastructure is negatively correlated with income inequality. The
studys ndings and the reviewof the literature suggest that globalization has both costs and benets and that
the opportunity for economic gains can be best realized within an environment that supports and promotes
sound and credible government institutions, education and technological development.
2008 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
JEL classication: FO2; I30; K19
Keywords: Globalization; Income inequality; Intellectual property rights; Developing countries
1. Introduction
The past two decades can be described as the era of globalization. Although there is no consen-
sus on the denition of globalization, a common term that is synonymously with globalization is
integration, in terms of people, capital, ideas, technology, and services (Houck, 2005). Empirically,
globalization translates into greater mobility of the factors of production (capital and labor) and
greater world integration through increased trade, foreign direct investment (FDI), and enforce-
ment of intellectual property rights [IPR] (Milanovic, 2005; Wade, 2001). Though many studies

Tel.: +233 285173307/209450202.


E-mail address: sadamss2000@yahoo.com.
0161-8938/$ see front matter 2008 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
doi:10.1016/j.jpolmod.2007.10.005
726 S. Adams / Journal of Policy Modeling 30 (2008) 725735
have been done to examine the effects of trade and FDI on both economic growth and income
inequality, not much has been on the effect of IPR. In the era of globalization, almost everyone is
a user and a potential creator of intellectual property and therefore its protection, which is called
intellectual property rights, should be of signicance to policymakers.
The purpose of this paper is to examine the impact of globalization especially the harmoniza-
tion of intellectual property rights (IPR) on income inequality. This is important because in the
past decade the protection of IPR has moved from an arcane area of legal analysis to the forefront
of global economic policymaking (Maskus, 2000a). This in no small measure has been motivated
by the successful completion of the World Trade Organizations (WTO) Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPs) in 1994. The TRIPS agreement set strong
minimumstandards in each of the areas commonly associated with IPRs, including patents, copy-
rights, trademarks, and trade secrets (Maskus, 2000b). To the knowledge of the authors, this is the
rst paper to empirically examine the impact of IPRon income inequality in developing countries.
Further, we also control for regional groups to identify any differential effects of globalization
(with a particular reference to IPR) in developing countries.
The rest of the paper is organized as follows: Section 2 offers a brief review of the literature
on globalization and income inequality. Section 3 describes the data and methodology used and
Section 4 presents and analyzes the results. Section 5 presents the implications, directions for
future research, and offers concluding remarks.
2. Literature review
Many explanations have been given as to how global integration should affect the distribution
of income. For example, the neoclassical growth theory and the neoliberal paradigm, which
dominated public policy on issues of national development in the 1990s, suggest that integration in
to the world economy through trade and FDI should lead to reduction in the distribution of income
across nations (Heshmati, 2005; Wade, 2001). Thus, in the spirit of lawof even development or the
modernization perspective, countries are more likely to gain from integration into international
markets relative to less integration. The modernization perspective suggests that continued growth
expandthe middle class andincreases employment andthe savings rates amongthe poor, leadingto
reductioninincome inequality(Beer, 1999). The implicationis that developingeconomies wishing
to catch up with the standards of living of the developed countries should open up their markets
by lowering tariffs, removing trade restrictions, granting privileges to FDI and enforcing IPR. As
noted by Maskus (2000a) effective IPR regime has an effect not only on the incentive for new
knowledge creation and its dissemination, but even more important, the market structure, prices,
and distributional equity. Also, the CIPR (2002) report noted that in the poorest regions of the
world, strengthening IPRcould help to stimulate invention and newtechnologies, thereby leading
to an increase in agricultural or industrial production in less developed countries that could have
positive effect on the distribution of income. A World Intellectual Property Organization [WIPO]
(2003) report noted that intangible assets such as knowledge, creativity and inventiveness are
rapidly replacing traditional and tangible assets such as land labour and capital as the driving
forces of economic development.
Contrary to the idea of convergence, anti-globalization advocates have long claimed that global
integration is a cause of divergence rather than convergence of incomes between the worlds
economies. They suggest that the traditional causes of income inequality (e.g., land concentration,
unequal access to education, and urbanrural gap) are unlikely to explain the rise the increase
in income inequality in the past two decades. Such an increase, they argue is more likely to be
S. Adams / Journal of Policy Modeling 30 (2008) 725735 727
related to the adoption of unfettered trade liberalization of domestic and international markets and
the shifts towards skill-intensive technologies all over the world (Giovanni, 1999). The idea of
divergence is consistent with the endogenous growth theory, which predicts divergence in income
between nations because of the increasing returns to knowledge and technological innovation,
which are more abundant in the developed countries.
Similarly, the dependency approach predicts that divergence is more likely from integration
because of the differential in benets from economic integration for developed and developing
countries. Thus, national income inequality is in large part determined by growth potentials of pro-
ductivities in the large global structure. For instance, Bornschier and Chase-Dunn (1985) claimed
that foreign investment creates an industrial structure in which monopoly is predominant, leading
to what they describe as underutilization of productive forces in the overall economy As a result,
countries that are wholly dependent on foreign investment will experience stagnation, unemploy-
ment, and increasing inequality. There are many studies like that of Bornschier and Chase-Dunn
(1985), which indicate that FDI is the primary means through which the modern capitalist world
system creates and maintains intra and international socioeconomic inequities (Beer, 1999).
Giventhe conictingtheoretical views, manyempirical studies have beenconductedtoexamine
the impact of the globalization on income inequality for both developed and developing countries
with a few focusing specically on developing countries. Like the theoretical studies, however,
the empirical studies have given inconsistent results. For example, while Milanovic (2002, 2005)
and Barro (2000) nd globalization to be proinequality, Ravallion (2001) and Dollar and Kraay
(2002) nd the effect of trade openness on income inequality to be insignicant. Milanovic (2005)
studied 77 countries between 1988 and 1998 and found that globalization (trade share in GDP) had
a negative effect on the distribution of income. However, the author reported that globalizations
effect was more severe for countries with GDP per capita income of less than $8000. Conversely,
Dollar and Kraay used an unbalanced data of 92 countries over a period of 40 years (19601999)
and found that that their openness measure was not signicantly related to the income share of
the lowest quintile.
Like the openness measure, results of studies on the FDIincome inequality relationship have
been ambiguous. While Dixon and Boswell (1996a, 1996b) and Beer (1999) reported a positive
correlation between FDI and income inequality, Sylwester (2005) reported otherwise. However,
Tsai (1995) suggested that the typical positive nding between FDI and income inequality might
be due to most of the studies not controlling for regional differences. To assess Tsais (1995)
assertion that the positive correlation between FDI and income inequality may have emerged
spuriously, Alderson and Nielsen (1999) used a large data set of 88 countries from 1967 to 1994.
They found that controlling for the different geographical regions did not change the signicant
positive effect of foreign capital penetration on income inequality. On the other hand, Sylwester
(2005) in a study of 29 less developed countries from 1970 to 1989 reported that there is no
evidence that FDI is associated with income inequality. Instead, the evidence though weak, points
to a negative association between FDI and income inequality.
With respect to IPR, though there have been a lot of theoretical and empirical studies on
the impact of IPR on economic growth (Falvey, Foster, & Greenaway, 2006; Park & Ginarte,
1997; Thompson & Rushing, 1996, 1999), almost all the studies on the IPRincome inequality
relationship are theoretical in nature. Consequently, this study contributes to the literature on
globalization by examining empirically the effect of strengthening of IPR on income inequality
in developing countries. Nevertheless, the consensus of the studies so far indicate that the scope,
depth, and enforcement of IPR are likely to differ across countries according to their economic
and political institutions, and ability to engage in and disseminate the fruits of research and
728 S. Adams / Journal of Policy Modeling 30 (2008) 725735
development (R&D) (La Croix & Konan, 2006). In light of these ndings, CIPR (2002) assert
that developing countries are less likely to benet from the harmonization of IPR, as the R&D
needed to promote innovation is absent.
The reviewof the empirical literature indicates that the impact of the globalization variables on
income inequality is inuenced by data heterogeneity, observed and unobserved country-specic
effects, and endogeneity issues. Accordingly, we control for these factors in our analysis of the
impact of globalization on income inequality for a panel data set of 62 developing countries over
the period 19852001. The data and empirical methodology used are described below.
3. Methodology and data
The empirical analysis is based on a panel data set consisting of four separate periods of 5-year
intervals between 1985 and 2001. In this study we employ a form of panel regression where we
regress the dependent variable at a time T against the independent variables at a previous period
time (T-1, T-2, or T-3) depending on the availability of Gini data. The independent variables are
taken for 1985, 1990, 1995, and 2000 and the dependent variable is taken for 1987, 1993, 1996, and
2001. The use of lagged values helps to reduce any problems of reverse causality or endogeneity
related to income inequality and the globalization variables. We use the 5-year intervals because
the IPRs data is available for these periods. The equation we estimated is specied as follows:
Gini
it
=
0
+
1
FDI
it
+
2
OPEN
it
+
3
POP
it
+
4
GOV
it
+
5
INST
it
+
6
SEC
t
+
7
IPR
it
+
8
LGCAP
it
+
9
LGCAPSQ
it
+
i
+
it
where Gini (a measure of income inequality) is the variable to be explained for a country i at a time
t; foreign direct investment (FDI), integration in to the world economy (OPEN), and intellectual
property rights (IPR) are the globalization variables; POP represents population and GOV is
government consumption; INST is a proxy for a countrys overall institutional or governance
infrastructure; SEC represents human capital; LGDCAP controls for the level of development
and LGCAPSQis the square of LGCAP;
i
s are the coefcients to be estimated;
i
represents the
country-specic effect which is assumed to be time invariant, and
it
is the classical disturbance
error term.
We estimate a system of four equations using the seemingly unrelated regressions (SUR)
method. The SUR estimation allows for different error variances in each equation and for correla-
tion of these errors across equations (Makki &Somwaru, 2004). To eliminate any country-specic
effects or unobserved heterogeneity we rst-differenced the data. To further eliminate or reduce
heteroscedasticity problems we used SUR with cross-section weights.
The Gini index is measured as the Gini coefcient multiplied by 100. The Gini coefcient
is a ratio with values between 0 and 1, with 0 representing perfect income equality and 1 being
perfect inequality. Thus, higher values of the index indicate increasing inequality and lower values
explain otherwise. The income inequality data is obtained from Chen, Datt, and Ravallion (2004)
POVCALsoftware, which is maintained on the World Banks website. LGCAPSQis an additional
variable that is included in the income inequality regressions as the level of development and
income inequality is hypothesized to exhibit a curvilinear relationship (Ahluwalia, 1976; Kuznets,
1955; Lee, 2006; Sylwester, 2005; Tsai, 1995); Income inequality is therefore expected to increase
initially but over time, continual growth will lead to a reduction in income inequality. We therefore
expect LGCAP and LGCAPSQ to be positively and negatively correlated with income inequality,
respectively.
S. Adams / Journal of Policy Modeling 30 (2008) 725735 729
Table 1
Descriptive statistics
INEQ IPR FDI OPEN
Mean 45.85 2.27 1.97 61.96
Maximum 66.70 4.04 16.17 231
Minimum 28.41 0.00 5.21 0.929
S.D. 9.24 0.80 2.58 36.13
The globalization literature suggests that openness promotes growth; however, it also increases
income disparities between countries. Consequently we expect the openness measure (trade share
in GDP) to exert a positive effect on economic growth and a negative effect on the distribution
of income. From the perspective of the globalization advocates, FDI may play a signicant role
in generating positive spillover effects in terms of new technologies and management skills that
contribute to growth (Sylwester, 2005). However, the modernization and dependency theories,
suggest that FDI may have negative effect on the distribution of income and consequently we
expect FDI to be positively correlated with income inequality. IPR is expected to have positive
effect consumer welfare and overall social progress especially in highly innovative countries with
active R&D. However, R&Dis nearly absent in most developing countries and therefore we expect
IPR to have a negative effect on the distribution of income.
The data on SEC and FDI come from the World Development Indicators CD-ROM (2006),
and are measured as the gross secondary school enrollment and net FDI inows share in GDP,
respectively. The strength of intellectual property rights protection (IPR) is measured by the
GinartePark index of patent rights, which is based on ve categories of patent laws: (1) extent of
coverage; (2) membership in international patent agreements; (3) provisions for loss of protection;
(4) enforcement mechanism; and (5) duration of protection. Each of these categories (per country,
per time period) is scored a value ranging from0 to 1, and the outweighed sumof these ve values
constitutes the overall value of the patent rights index. The index therefore ranges from 0 to 5,
with higher numbers indicating stronger protection.
Data on OPEN (trade share in GDP) and the level of development (GDP per capita) were
obtained from the Global Development Network Growth Database (2007) and data on the gov-
ernment consumption and gross xed investment were obtained from the World Development
Indicators CD-ROM (2006). The institutional variable is a composite measure of the investment
climate, which is obtained from the Political Risk Services Country Risk Guide (2006). It is
made up of three measures: political, nancial, and economic risk and it includes factors like
law and order, government stability, bureaucratic quality and corruption. It is rated on a scale of
zero to 100, with zero meaning highest risk and 100 referring to the lowest risk. We expect a
negative effect of INST on income inequality as good governance would ensure that rent seek-
ing by privileged groups is avoided or at the least reduced and also ensures that government
bureaucracies concentrate on enhancing the opportunities and possibilities of the poor (Lopez,
2003). The descriptive statistics is presented in Table 1 and the list of countries is presented in the
Appendix A.
4. Results and discussion
The regression results are reported in Table 2. Column 1 shows that the globalization variables
explain about 15% of the variance in income inequality. The results show that strengthening IPRs
7
3
0
S
.
A
d
a
m
s
/
J
o
u
r
n
a
l
o
f
P
o
l
i
c
y
M
o
d
e
l
i
n
g
3
0
(
2
0
0
8
)
7
2
5

7
3
5
Table 2
Regression coefcients for the impact of globalization on income inequality
1 2 3 4 5 6
OPEN 0.005
**
(0.002) 0.017
***
(0.004) 0.009
***
(0.004) 0.011
**
(0.005) 0.005 (0.006) 0.010
*
(0.005)
IPR 1.137
***
(0.255) 1.177
***
(0.327) 1.155
***
(0.363) 1.227
***
(0.379) 1.155
***
(0.363) 2.045
***
(0.399)
FDI 0.009 (0.021) 0.115
**
(0.047) 0.051 (0.067) 0.054 (0.071) 0.051 (0.067) 0.059
*
(0.047)
LGCAP 0.804 (1.302) 4.632
***
(1.180) 5.156
***
(1.392) 2.717
**
(1.112) 1.713 (0.927)
GOV 0.047
**
(0.021) 0.019 (0.046) 0.002 (0.042) 0.017 (0.043) 0.049
*
(0.027)
INST 0. 040
**
(0. 017) 0. 043
***
(0. 014) 0. 039
***
(0. 014) 0. 038
***
(0. 012) 0. 036
*
(0. 017)
POP 0.000
**
(0.000) 0.000
***
(0.000) 0.000
***
(0.000) 0.000
***
(0.000) 0.000
**
(0.000)
SEC 0.012 (0.021) 0.013 (0.022) 0.000 (0.020)
LGCAPSQ 25.315 (22.197)
ASIA 1.274
***
(0.409)
LA 0.920 (0.734)
SSA 0.557 (0.601)
IPR*AS 0.006 (0.004)
IPR*LA 0.505 (0.709)
IPR*SSA 2.568 (0.622)
Constant 0.120
***
(0.028) 0.229
*
(0.120) 0.314
***
(0.084) 0.350
***
(0.081) 0.416 (0.622) 0.129 (0.091)
N 175 155 136 136 136 155
R
2
adjusted 0.15 .18 0.47 0.60 .49 .28
Note. t-statistics in parentheses.
*
Signicant at the 10% level.
**
Signicant at the 5% level.
***
Signicant at the 1% level.
S. Adams / Journal of Policy Modeling 30 (2008) 725735 731
has a signicant positive effect on income inequality in almost all the model specications. This
nding is consistent with the assertion that not only do developing countries not benet from
strengthening the IPR system, but that they may be worse off with the benet accruing to more
developed or innovating countries. Furthermore, it is possible that some corporations will focus
their resources on defending their original innovations rather than developing new products and
therefore limiting their output below socially desirable levels leading to negative consequences
on consumer welfare (Shapiro & Hassett, 2005). Controlling for regional differences does not
change the coefcient on the IPR variable (Column 4). Further, the cross product of the IPR and
regional dummies show that none of the interaction terms is signicantly correlated with income
inequality (Column 6), which indicates that strengthening IPR does not exert different effects in
developing countries. OPEN is also positive and signicantly correlated with income inequality,
suggesting that increased integration into the world economy negatively affects the distribution
of income in developing countries.
FDI, however, is negative and in a fewcases even signicantly related to income inequality. The
implication is that increased ow of FDI may have a positive effect on the distribution of income
in developing countries. It is important to note, however, that many studies have suggested that
FDI has been more productive in Asia than in other regions of the world (Agosin & Mayer, 2000;
Fry, 1993), which suggests that FDIs effect may be sensitive to regional differences. As noted in
Column 5, when the regional groups are controlled for, the FDI variable is no longer signicant
supporting the assertion of Tsai (1995) that FDIs effect on income inequality is sensitive to the
type of countries included in the study.
The LGCAP and its power term (LGCAPSQ) have the correct signs but the LGCAPSQ is not
signicant and therefore we do not nd support for a curvilinear relationship between the level of
development and income inequality for the sample of countries over the study period (Column 4).
With respect to the other explanatory or control variables, the institutional, population, govern-
ment consumption, and human capital variables are negatively correlated with income inequality,
while the level of development is positively correlated with income inequality. The effect of the
institutional variable is one of the most robust ndings to different model specications, which
suggests that the country conditions in particular, may be more important in inuencing the dis-
tribution of income than any domestic or international policy per se. Though the human capital
variable is never signicantly related to income inequality, it is important to note, however, that
when it is included in the regression, the explanatory power of the model improves signicantly
as seen in the increase of the adjusted coefcient of determination from less than 0.20 (Columns
1 and 2) to a high gure of 0.60 (Columns 5). This result might mean that though human capital is
an important element in reducing income inequality; most of the countries of the studys sample
have not reached the minimum threshold of skill needed to positively affect the distribution of
income.
5. Policy implications and concluding remarks
The impact of globalization on income inequality has been generally examined in the literature
with only a fewfocusing specically on developing countries. Further, many of these studies have
focused on two main channels of globalization, including trade and FDI. This paper contributes
to the literature by examining a third and important component of the globalization processthe
protection of intellectual property rights.
The results of the study show that trade liberalization and strengthening of IPR have a negative
effect on the distribution of income, while FDIs effect on income inequality is sensitive to the type
732 S. Adams / Journal of Policy Modeling 30 (2008) 725735
Table 3
IPR and Gini values in the 1990s
Region IPR Gini
SSA 2.66 46.9
LA 2.36 49.3
AS 2.11 35
Source: Authors calculation based on Ginarte and Park (1997) and Deninger and Squire (1996).
of countries included in the studys sample. Even more important, the study nds that the overall
country conditions in terms of the institutional infrastructure and skill level are key determinants
of income inequality. These results have policy implications.
First, it is important to note that though Latin American and African countries, for example,
are known to have more open economies and higher IPR protection compared to Asian countries,
the level of income inequality is lowest in Asia (Table 3).
Further, Asian countries have been more proactive in making use of TRIPS exibilities
(UNCTAD, 2007). India, for example, has taken WTO exibilities concerning IPR rules to refuse
patents on existing medicines. Indeed, India recently won a case against Novartis, that led a law-
suit against India challenging the constitutionality of Section 3(d) of the provision of Indian Patent
Lawthat states that patent monopolies will be awarded for only truly innovative medicines rather
than minor changes of existing medicines (Odell, 2007).
Similarly, Thailand has established a program to help it provide cheap medicines to people
with AIDS by issuing compulsory licenses on several patented medicines to ensure that they
are available at more affordable prices than they would otherwise be (Action for Global Health,
2007). The WIPO (2003) report indicated that Singapore and Korea have also adopted a proactive
approach to patent policy such that it promoted patent licensing, joint ventures, and strategic
alliances to encourage local inventions as well as foreign direct investment. Indeed, The WTOs
Doha Declaration in 2001 accepts governments rights to use compulsory licensing as a means
to facilitate access to cheaper medicines through import or local production (Commission on
Intellectual Property Rights, 2006).
Second, though IPR protection has been recognized as part of the infrastructure supporting
investments in R&Dleading to innovation and subsequent economic development (Kanwar, 2006;
World Bank, 2005, and World Intellectual Property Organization (WIPO), 2003), it is also known
that strengthening IPR has costs (Horii & Iwaisako, 2007; Maskus, 2000a). Even more critical
is the argument that the current global IPR system favors the holders of intellectual property,
which invariably happens to be the developed countries over the users of intellectual property
that are mostly the LDCs. This is not surprising as the number of global patents originating in
the 50 countries identied by the UN as LDCs has dropped from an average of 66 per year in the
early 1990s to just 10 per year between 2000 and 2004 (UNCTAD, 2007). Incidentally, the US
net surplus of royalties and fees increased from $14 billion in 1991 to $22 billion in 2001, while
developing countries suffered a decit of nearly $7.5 billion in 1999 alone. The discussion above
is consistent with the assertion of Helpman (1993) that if anyone benets from patent protection,
it is certainly not the South.
Third, the effectiveness of the IPRs systemis dependent onhowit impacts oninnovation, market
structure, and technology transfer (Naghavi, 2005), and hence the need to enhance the skill level
or absorptive capacity of domestic rms in improving their productivity. This requires investment
in information and communications technology, and education and job training to enhance the
S. Adams / Journal of Policy Modeling 30 (2008) 725735 733
entrepreneurial capability of both individuals and rms in the production of goods and services
to partake fully in the benets that globalization brings. Bernanke (2007), for example, has noted
that the greatest cause of inequality in the era of globalization can be attributed to the very high
returns to education and consequently, policies that maximize opportunities for education and
job training will help to reduce income inequality. Obviously, workers with more education and
training will be better able to adapt to the fast paced changing demands in the workplace in the
21st century.
Finally, globalization is not completely responsible for income inequality within and across
countries. As shown in Column 1, the studys results show that the three-globalization variables
explain only 15%of the variance in income inequality. This nding is consistent with the assertion
of Stewart and Berry (2000) that though globalization might negatively affect the distribution of
income, other country conditions, including labor laws, strength of unions and a variety of gov-
ernment safety net provisions might modify or accentuate the impact of globalization on income
inequality. Rather, the evidence suggests that countries that have grown rapidly and improved
their standard of living have not only opened up their economies for trade and FDI but have also
maintained macroeconomic stability (Rodrik, 1999).
The challenge for developing countries is how to reform their IPRs regime to maximize their
gains, while limiting the potentially adverse effects of improved protection and to facilitate access
of local entrepreneurs to the IPR system as has been done in India, Thailand, and South Korea. It
has also been argued the developed and those developing countries that have achieved substantial
growth rates have all ne tuned their IPRs system to match their development needs, rather
than blindly implementing a wholesale IPRs policy (CIPR, 2002; Dolfsma, 2006; Kumar, 2002;
Maskus, 2000a). These studies suggest that there has generally been an association with weak
rather than strong forms of patent protection in the formative period of economic development
and the IPRs regimes strengthened as countries became signicant producers of innovations and
new technology as seen in Korea and India.
In discussing the ndings and implications of the study, it is worth mentioning the limitations
of the study. First, the time period is not long enough to make conclusive statements about the
effect of globalization on income inequality. Data constraints made that impossible. Second, the
changing macroeconomic and political events in the various developing countries suggest that we
might not be able to capture all the factors that might inuence income inequality. The limitations
and the inconsistency of the other studies reviewed suggest that many more country-specic
studies are needed to validate the more global studies. Further, as more consistent data on income
inequality becomes available for many developing countries, it will be possible to evaluate the
long-run effects of globalization on the distribution of income
We conclude by asserting that globalization is neither inherently good nor bad for developing
countries, as current debates seem to suggest. Instead, globalization has both costs and benets.
However, the opportunity for economic gains can be best realized within an environment that
supports skilled resources, sound and credible government institutions, and technological devel-
opment. Without these fundamentals, the pursuit of economic gains through trade liberalization,
establishing incentives to attract FDI, and strengthening of IPR will not be achieved for develop-
ing countries. Clearly, the literature reviewed and the ndings of this study call for IPR regimes
norms to be ne-tuned to establish a balance between intellectual property protection and eco-
nomic development of developing countries. Globalization, even though may be biased against
developing countries, has created a situation in which countries with the appropriate policies
might be able to succeed in bringing about economic development as is the case for most of the
Asian economies.
734 S. Adams / Journal of Policy Modeling 30 (2008) 725735
Appendix A
List of countries in study sample
Algeria Ecuador Malaysia Senegal
Argentina Egypt Mali Sierra Leone
Bangladesh El Salvador Mauritania South Africa
Bolivia Ethiopia Mexico Sri Lanka
Botswana Ghana Morocco Swaziland
Brazil Guatemala Mozambique Tanzania
Burkina Faso Guyana Nepal Thailand
Burundi Honduras Nicaragua Tunisia
Cameroon India Niger Uganda
Central African Rep Indonesia Nigeria Uruguay
Chile Iran Pakistan Venezuela
China Jamaica Panama Vietnam
Colombia Jordan Paraguay Zambia
Costa Rica Kenya Peru Zimbabwe
Cote dIvoire Madgascar Philippines
Dom Rep Malawi Rwanda
References
Action for Global Health (2007). Health: EU opposes cheap anti-AIDS drugs in Thailand. http://www.
globalhealthnetwork.eu/news/ (accessed 08/29/07).
Agosin, M., & Mayer, R. (2000). Foreign direct investment: Does it crowd in domestic investment? (United Nations
Conference on Trade and Development Working Paper No. 146). Geneva, Switzerland.
Ahluwalia, M. S. (1976). Inequality, poverty, and development. Journal of Development Economics, 3, 307342.
Alderson, S. A., & Nielsen, F. (1999). Income inequality, development, and dependence. American Sociological Review,
64, 617628.
Barro, R. (2000). Inequality and growth in a panel of countries. Journal of Economic Growth, 5, 532.
Beer, L. (1999). Income inequality and transnational corporate penetration. Journal of World Systems Research, 5, 125.
Bernanke, B. (2007). Inequality and globalization. Speech delivered before the Greater Omaha Chamber of Commerce.
February 6, 2007. CQ Transcripts Wire.
Bornschier, V., & Chase-Dunn, C. (1985). Transnational corporations and development. New York: Praeger.
Chen, S., Datt, G., & Ravallion, M. (2004). A program for Calculating Poverty Measures from Grouped Data.
http://iresearch.worldbank.org/PovcalNet/Introduction.html (accessed on 04/1/07).
Commission on Intellectual Property Rights (2002). Integrating intellectual property rights and development policy.
London.
Commission on Intellectual Property Rights (2006). Intellectual property right, innovation and pubic health.
www.who.int/intellectualproperty (accessed on 08/23/07).
Deninger, K., & Squire, L. (1996). A new data set measuring income inequality. World Bank Economic Review, 10(3),
565591.
Dixon, W. J., &Boswell, T. (1996a). Dependency, articulation, and denominator effect: Another look at the foreign capital
penetration. American Journal of Sociology, 102, 543562.
Dixon, W. J., & Boswell, T. (1996b). Differential productivity, negative externalities, and foreign capital dependency:
Reply to Firebaugh. American Journal of Sociology, 102, 576584.
Dolfsma, W. (2006). IPRs, technological development, and economic development. Journal of Economic Issues, 40(2),
333342.
Dollar, D., & Kraay, A. (2002). Growth is good for the Poor. Journal of Economic Growth, 7, 195225.
Falvey, R., Foster, N., & Greenaway, D. (2006). Intellectual property rights and economic growth. Review of Development
Economics, 10, 700719.
Fry, M.J. (1993). Foreign direct investment in a macroeconomic framework: Finance, efciency, incentives, and distortions
(Policy Research Working Papers No. 1141). Washington, DC. World Bank.
Ginarte, J. C., & Park, W. (1997). Determinants of patent rights: A cross-national study. Research Policy, 26, 283301.
S. Adams / Journal of Policy Modeling 30 (2008) 725735 735
Giovanni, A.C. (1999). Liberalization, globalization, and income distribution (UNU-WIDER Working Paper No. 157).
Helsinki.
Global Development Network Growth Database. http://www.nyu.edu/fas/institute/dri/database.html. Accessed on 4 Jan.
2007.
Helpman, E. (1993). Innovation, imitation, and intellectual property rights. Econometrica, 61(6), 12471280.
Heshmati, A. (2005). The relationship between inequality, poverty, and globalization (WIDER Research Paper No.
2005/37). Finland.
Horii, R., & Iwaisako, T. (2007). Economic growth with imperfect protection of intellectual property rights. Journal of
Economics, 90, 4585.
Houck, M. (2005). Globalization and inequality. Maryland: St. Marys Project.
Kanwar, S. (2006). Innovation and intellectual property rights (Center for Development Economics Working Paper No.
142). India: Delhi School of Economics.
Kumar, N. (2002). Intellectual property rights, technology transfer, and economic development: Experiences of Asian
countries. Commission on intellectual property rights background paper 1b. London: Commission on intellectual
property rights.
La Croix, S. J. L., & Konan, D. (2006). Have developing countries gained from the marriage between Trade Agreements
and Intellectual Property Rights? (University of Hawaii Manoa Economics Working Paper No. 06-5).
Lopez, H. (2003). Macroeconomics and Inequality. The World Bank Research Workshop on Macroeconomic Challenges
in low-income countries. Washington, DC: The World Bank.
Lee, J. (2006). Does globalization matter to income distribution in Asia? Journal of Policy Modeling, 28, 791796.
Kuznets, S. (1955). Economic Growth and Income Inequality. American Economic Review, 45, 128.
Makki, S., & Somwaru, A. (2004). Impact of foreign direct investment and trade on economic growth: Evidence from
developing countries. American Journal of Agricultural Economics, 86, 795801.
Maskus, Keith E. (2000). Intellectual property rights and economic development. Case Western Journal of International
Law, 32, 471506.
Maskus, Keith. E. (2000b). Intellectual property rights in the global economy. Washington, DC: Institute of International
Economics.
Milanovic, B. (2002). Can we discern the effect of income distribution? Evidence from household budget surveys (World
Bank Policy Research Working Paper 2876). Washington, DC: World Bank.
Milanovic, B. (2005). Can we discern the effect of income distribution? Evidence From household budget surveys. World
Bank Economic Review, 19, 2144.
Naghavi, A. (2005). Strategic Intellectual Property Rights Policy and NorthSouth Technology Transfer. NOTA DI
LAVORO 18.2005, Milano.
Odell, M.A. (2007). Awin for generic drugs: Indian court rules against drug maker Novartis. http://www.socialfunds.com.
M. Park, W. & Ginarte, J. C. (1997). Intellectual property rights and Economic Growth. Contemporary Economic Policy,
15, 5160.
Political Risk Services Country Risk Guide (2006). http://www.prsgroup.com/CountryData.aspx. Accessed on May 2007.
Ravallion, M. (2001). Inequality convergence. World Bank Policy Research Working Paper No. 2645. Washington, DC:
World Bank.
Rodrik, D. (1999). Where Did All the growth go? External shocks, social conict and growth collapses. Journal of
Economic Growth, 4, 385412.
Shapiro, R, & Hassett, K. (2005). The economic value of intellectual property. USA for Innovation. Washington, DC.
Stewart, F., & Berry, A. (2000). Globalization, liberalization, and inequality: Real causes. Challenge, 43, 4492.
Sylwester, K. (2005). Foreign direct investment, growth, and income inequality in less developed countries. International
Review of Applied Economics, 19, 289300.
Thompson, M., & Rushing, F. (1996). An empirical analysis of the impact of patent protection on economic growth.
Journal of Economic Development, 21(2), 6179.
Thompson, M., & Rushing, F. (1999). An empirical analysis of the impact of patent protection of economic growth: An
extension. Journal of Economic development, 24, 6776.
Tsai, P. L. (1995). Foreign direct investment and income inequality: Further evidence. World Development, 23, 469483.
United Nations Commission on Trade on Development [UNCTAD], (2007). The Least Developed Countries Report:
Knowledge, technological learning and innovation for development.
Wade, R. H. (2001). The rising inequality of world income distribution. Finance & Development, 38, pp. 3736
World Bank (2005). World Development Indicators, Washington, DC: World Bank.
World Bank (2006), World Development Indicators. Washington, DC: World Bank.
World Intellectual Property Organization [WIPO] (2003). Intellectual propertypower tool for economic growth. Geneva.