Trade Flows and IPR Protection: A Dynamic Analysis of the Experience of ASEAN-6 Countries

Yoon Heo and Nguyen Khanh Doanh

This paper examines the impacts of intellectual property rights (IPR) protection in foreign markets on ASEAN countries’ exports for the period 2005-2010 using a dynamic panel data model, which allows us to account for persistence effects. In order to solve the inconsistency of OLS in a dynamic modeling, we opt for the system GMM estimator because it helps researchers overcome the problems of serial correlation, heteroskedasticity, and endogeneity for some explanatory variables. Our results are robust and summarized as follows. First, reinforced IPR protection in foreign countries has a positive effect on ASEAN’s exports, indicating the dominance of market expansion effects. Second, regardless of the level of economic development in importing countries, stronger IPR protection induces ASEAN’s exports to foreign countries. Third, the trade impacts of IPR protection are strongest in high-income trading partners, followed by medium-income, and finally, low-income partner countries. Fourth, at the sectoral level, the effect of IPR protection is found to be the strongest for capital-intensive exports to highly developed countries and the weakest for capital-intensive exports to less developed countries. Thus, it is likely that ASEAN’s exports will increase if appropriate measures are taken to strengthen IPR protection in foreign countries.

Keywords: Intellectual Property Rights, Imitative Ability, System GMM Estimator, ASEAN, Gravity Model