Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)

GEP Research Paper 08/46

 

International Outsourcing, Tax and Patent Protection

 

Soumyananda Dinda and Arijit Mukherjee

Summary

We show that, in the case of a vertical technology transfer, if there is imperfect knowledge spillover under a weak patent protection, the strong patent protection in the developing country increases the profit of the developed-country firm if there is a uniform tax rate in the developing country. If there is either perfect knowledge spillover under weak patent protection or the developing country charges discriminatory tax rates, the profits of the developed-country firms are the same under weak and strong patent protections in the developing countries.

 

Abstract

 

We show that, in the case of a vertical technology transfer, if there is imperfect knowledge spillover under a weak patent protection, the strong patent protection in the developing country increases the profit of the developed-country firm if there is a uniform tax rate in the developing country. If there is either perfect knowledge spillover under weak patent protection or the developing country charges discriminatory tax rates, the profits of the developed-country firms are the same under weak and strong patent protections in the developing countries.

 

JEL classification: F23, L13, H25, O34

 

Keywords: International outsourcing, Knowledge spillover, Patent protection, Tax

 

Issued in December 2008

 

This paper is available in PDF format

 

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