Globalization, Divergence and Stagnation

in total GDP form PWT6.0.²⁵ Although the Hrst is useful to distinguish countries
under different trade regimes, it exhibits almost no time variation in the sample and
is therefore appropriate for the cross-section only. The second measure, instead,
captures well the increase in market integration over time. Country size is measured
by total population (POP), as reported in PWT6.0. The last challenge is to find
reliable data on the degree of protection of intellectual property. In this respect, this
study uses the index of patent rights built by Ginarte and Park (1995). Although
patents are only a component of IPRs, they are likely to be highly correlated with the
overall level of protection; further, this index has the advantages of being available
for a large number of countries with quinquennial observation since 1965 and of
being based on both the strength and enforceability of national laws.²⁶ The index
(IPR) ranges from 0 to 5. In summary, the overall dataset comprises a cross-section
of 53 countries and 6 time observations, from 1965 to 1990 at 5 year intervals.²⁷
Descriptive statistics are reported in Table 1.

To get a first sense for the patterns in the data, Table 2 presents a set of condi-
tional correlations. The results are encouraging for the present theory. As predicted
by the model, IPRs protection is associated with higher productivity only for coun-
tries classified as open by Sachs and Warner. The correlation is zero for closed
economies. Likewise, being open has a much higher correlation with productivity in
countries with strong patent rights. Also the second prediction in (26) seems broadly
consistent with the data, as IPRs protection is found to have a higher correlation
with productivity in larger countries.

²⁶According to Sachs and Warner, an economy is classified as open if satisfies all of the following
criteria: (1) nontariff barriers cover less than 40 percent of trade (2) average tariff rates are less than
40 percent (3) any black market premium was less than 20 percent during the 1970s and 1980s (4)
the country is not classified as socialist and (5) the government does not monopolize major exports.

²⁶This index is based on an assessment of five aspects of patent laws: (1) extent of coverage, (2)
membership in international patent agreements, (3) provision for loss of protection, (4) enforcement
mechanisms and (5) duration of protection. An alternative, but time-invariant, measure of IPRs
is provided by Rapp and Rozek (1990). On the cross-section, the two proxies yield very similar
results.

'Data are available for the following countries: Argentina, Australia, Austria, Belgium, Bo-
livia, Botswana, Canada, Chile, Colombia, Denmark, Dominican Rep., Ecuador, Finland, France,
Greece, Guatemala, Honduras, Hong Kong, Iceland*, India, Iran, Ireland, Israel, Italy, Jamaica,
Japan, Kenya, Korea Rep., Malawi, Mauritius, Mexico, Nepal, Netherlands, New Zealand, Nor-
way, Panama*, Paraguay, Peru, Philippines, Portugal, Sierra Leone, Spain, Sri Lanka, Sweden,
Switzerland, Syria, Thailand, Turkey, U.K., U.S.A., Venezuela, Zambia, Zimbabwe. An asterisk (*)
indicates no Sachs and Warner index available.

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