Improving agricultural exports is a driver for economic growth for Developed and Developing nations alike. Resources invested in the research and development of agricultural products is normally protected by intellectual property rights. Over the years researchers have looked at whether these legal protections actually promote exports.
The Gravity Model is a tool most commonly when looking at the movement of goods and factors across national borders under varying circumstances (Anderson 1979). The model is used to estimate trade between nations as a function of importer and exporter characteristics. Tariffs, borders, treaty membership, and other variables can be included to estimate their impact on bilateral trade. The model is used when the structure of the traded goods are similar in both countries (Anderson 1979), a characteristic inherent in agricultural products.
Economists Chih-Hai Yang and Rhung-Jieh Woo used the gravity model to examine how national differences in IPR’s influence seed imports from the United States. The authors use longitudinal data spanning 60 countries to estimate the relationship between IPR’s and seed trade. These countries are in varying geographical locations and account for 80% of total U.S. seed exports (Yang and Woo 2005).
The empirical study uses the gravity model with different variables taken into consideration. In addition to the national populations, GDP, and distance, the authors include the amount of land available in the importing country (Yang and Woo 2005). The assumption is based on the observation that this variable should be positively correlated to trade volume; the more land is available for planting the larger seed trade volume is expected.
To account for international IPR membership, the researchers used the Paris Convention on Patents, the UPOV, and the TRIPS agreements as binary dummy variables (Yang and Woo 2005). Countries that signed any one of the agreements gets a value of 1, while non-signatories get a value of zero. One of the key reasons for using a binary approach to IPR’s is that it allows the authors to capture status rather than degree of adherence (Yang and Woo 2005). They specify that membership to a particular IPR agreement is different from the level of enforcement. This difference stems from the difficulty in accounting for the enforcement practices used across countries (Yang and Woo 2005).
Prior to presenting the results from their empirical analysis the authors looked at the date the countries signed the UPOV and the amount of seed imported before and after membership. They found that for some countries such as Canada, joining of the UPOV did not increase seed imports (Yang and Woo 2005).
As a result of the study the authors determine that the model does not provide sufficient evidence that the membership to an IPR regime promotes agricultural trade. This observation was synonymous for all countries except Uruguay. On the other hand, Uruguay experienced a substantial increase in seed trade after signing the agreement.
In a different study, researchers examined other variables such as IPR compliance and enforcement. Can IPR enforcement further improve the explanation of this relationship? In the next post we will further explore the topic and look a close look at how examining different variables within the Gravity Model can improve our understanding of how agricultural innovation is disseminated across the globe.