Intellectual property‐related preferential trade agreements and US offshoring to developing countries

Abstract

International standards in the protection of intellectual property rights (IPRs) are increasingly guided by bilateral and regional preferential trade agreements (PTAs). We estimate the effect of these IP‐related PTAs on US offshoring in developing countries. We utilize a difference‐in‐difference empirical methodology that addresses several sources of endogeneity and exploits industry variation in the importance of IPRs. IP‐related PTAs are associated with a substantial increase in US offshoring in IP‐intensive industries relative to non‐IP‐intensive industries. This increase is concentrated within the boundaries of the multinational firm. PTA‐induced IPRs reform impacts both the intensity and composition of multinational activity in developing countries.