Tariffs and technology transfer through an intermediate product

Abstract

We examine the relationship between tariffs and North-South technology transfer in an oligopoly model when technology is embodied in a key component that only North firms can produce. They may have an incentive to transfer their technologies to South firms even if the South's licensing market is restricted or if intellectual property right protection is imperfect in the South. Interestingly, a decrease in the tariff on the final good as well as an increase may induce technology transfer. Our analysis suggests that the South should implement pro-competitive policies to induce technology transfer and enhance welfare. © 2009 Blackwell Publishing Ltd.