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With whom do you trade? Defensive innovation and the skill-bias

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We examine whether increased trade with countries with ineffective protection of intellectual property has contributed to the skill-deepening of the 1980s. We construct an index of effective protection of intellectual property at the country level, combining data on protection of patents and rule of law. Next, we construct an industry-specific version of this index, using as weights each country's trade share in the total trade of the industry. We find a decline in this trade-weighted index, owing to a rise in trade with countries with low effective protection of intellectual property, which explains 29% of the rise in within-industry skill-intensity.

Keywords: F14; F16; J31

Document Type: Research Article


Affiliations: 1: Economics and Political Science, INSEAD 2: NOVA School of Business and Economics, Lisbon

Publication date: November 1, 2010

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