One of the most common root causes of both violent international and intranational conflict has been argued to be scarcity (Hume 1751, pp. 14–34). If our indefinite needs were equal to unlimited resources, then there would be no basis for conflicts over possessions. To alleviate the problem of scarcity and thus reduce conflict, it is necessary for a nation to establish a set of rules that will govern the usage of scarce resources. In Latin America, conflicts arising due to ill-defined property rights are quite common. A case study in Nicaragua, for instance, revealed that about 40% of all Nicaraguan households found themselves in conflicts over property rights (Stanfield 1995). Well-defined property rights can fulfil this function of alleviating problems caused by scarcity and encourage individuals to utilize available resources effectively (Meinzen-Dick and Knox 1999). A country’s system of property rights plays an important role in determining the level of development in that country and is often defined as a bundle of different rights (see, e.g., Alchian and Demsetz 1973; Eggertsson 1990; Everest-Phillips 2008; Besley and Ghatak 2010). Property rights themselves are often considered to comprise four main components: the right to use and possibly exclude others from using the property; the right to modify the property; the right to transfer it to somebody else; and finally, the right to sell and generate revenue that the individual can claim for herself.
With respect to IPP, patents protect new ideas and give the inventor or patent holder a (temporary) monopolistic position. Other important instruments for IPP include copyright law, trademark law, and trade-secret law; these instruments are often used to prevent and combat counterfeiting (Fisher 2001). According to article 7 of the TRIPS agreement, the main objectives of IPP are described as follows: “The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge in a manner conducive to social and economic welfare, and to a balance of rights and obligations.” (TRIPS 1994, Article 7). In most Latin American countries, the full enforcement of the TRIPS agreement has brought about many changes in intellectual property rights regimes. Reforms have extended protection of intellectual property to new fields (e.g., software piracy) and exclusive rights have been strengthened (Correa 2000; Son and Lee 2018).
Property rights, intellectual property protection, and life satisfaction
To investigate any potential association between PR and IPP and how individuals experience their lives, we make use of the, now well established and validated, economics of life satisfaction research area (Oswald 1997; van Praag and Ferrer-i-Carbonell 2004). This is a popular area of economic enquiry which has been studied in relation to many different phenomena. Diverse examples include unemployment and inflation, as well as economic development, overeducation, self-employment, and culture (respectively: Di Tella et al. 2003; Mikucka et al. 2017; Piper 2015a; Hetschko 2016; Hand 2017). For reviews see Frey et al. (2010), Veenhoven (2015), Weimann et al. (2015) and Clark (2018). A handbook discussing well-being in the context of Latin America has also been recently published (Rojas 2016). The pattern of happiness in Latin America is particularly interesting, because the region reports high levels of well-being which do not coincide with the level of income and development. Beytía (2011) investigated the determinants of happiness in Latin America, Western Europe and the United states, and found that in Latin America, financial satisfaction matters significantly less for happiness than in the other regions.Footnote 2
Despite the growing interest in happiness research, in Latin America this field is not as established as it is in other regions. As pointed out by Díaz (2016, p. 80): “The research field of happiness and positive psychology or the economics field of happiness or well-being, which are the usual fields of study, are relatively new fields in the occidental world and even newer in Latin America. The scientific production by Latin American authors on happiness in indexed journals (WoS and SciELO), yielded 44 articles from the countries in this continental region and in the 12-year period taken into consideration.” Similarly, any association between PRs and IPP and life satisfaction has, until now, received little attention (generally and in Latin America specifically) and just below potential links are presented. These links look to the past, as well as the modern economics of life satisfaction research area.
Regarding the link between property rights and life satisfaction, there are some clear reasons to believe that secure property rights might affect life satisfaction. Historically, a number of political theorists have long stressed that property rights might yield psychological benefits, increasing individuals’ satisfaction with life. For example, both Jeremy Bentham and John Stuart Mill justify PRs (and the protection of intellectual property in particular) by referring to the social and economic conditions which they create. A related argument is that these rights create an environment beneficial for creative intellectual activities (Munzer 2007; Mandel 2011). Intellectual property protection ensures that the inventor of an idea is compensated for their research and development effort and prevents risk of imitation. As a result, the inventor has an incentive to further develop their product or to work on new ideas. While a considerable amount of research has been carried out on the relationship between innovation and economic growth, there have been only few empirical investigations into the relationship between innovation and subjective well-being. Many of these investigations have only established an indirect link between them through theories of economic growth (see, e.g., Grossman and Helpman 1991; Howitt and Aghion 1998). In contrast, Dolan and Metcalfe (2012) have used British data to investigate a direct link and concluded that there appears to be a positive association of innovations with subjective well-being. This suggests that, in Britain at least, strong IPP may contribute to subjective well-being, by protecting inventors from imitation thereby enhancing innovation. However, from a consumer’s perspective the opposite might be the case: it is conceivable that better enforced IPP can raise the cost of common purchases, like those for entertainment purposes, and thus lower life satisfaction. This might be a potentially larger issue in Latin America because, as recent news reports demonstrate, while many people there consume pay television, few people pay for it.Footnote 3
Another relevant idea comes from John Locke. In his natural rights theory, Locke emphasizes that it is conceivable that strong property rights play a key role in protecting personal freedom, which, in turn, has been positively associated with greater well-being in more contemporary literature (for example, Veenhoven 1996; Helliwell and Huang 2008; Bavetta et al. 2016). Similarly, Helliwell et al. (2015) have found that the degree of freedom to make life choices has a large positive impact on the individual’s well-being. Taken together, one possible implication of these observations is that a system of secure and well-defined property rights may lead to greater happiness by allowing individuals to act independently and thereby preserve individual freedom.Footnote 4
A potential link between enhanced property rights and individual well-being involves the protection of financial assets and financial stability.Footnote 5 As Bordo (2007) suggests, strong property rights constitute a key factor in financial stability, because they foster an environment favourable for both investing in and holding financial assets. Furthermore, financial stability itself has been identified as an important predictor of life satisfaction (Oishi et al. 2009; Green and Leeves 2013). This relationship between financial stability and life satisfaction can be related to the idea of loss aversion, which describes how the pain of loss is stronger than the joy of gain. It follows that, by lowering the risk of financial expropriation, protecting individuals’ financial assets, and thus enhancing financial stability, stronger property rights might positively affect life satisfaction.
Another potential path through which property rights may affect well-being involves health. Labelled as the “intellectual property rights dilemma for pharmaceuticals”, it is a topic that has been discussed by many scholars as it presents a serious challenge. The argument is that, from a public health perspective, IPP instruments such as patents can decelerate the diffusion of new pharmaceuticals and medical technologies (Cohen and Illingworth 2004). As a result, the cost of health care increases, making it less accessible to people in developing countries (Sathwara and Bhandari 2016). Many scholars in the area of life satisfaction have maintained that physical health affects subjective well-being (e.g., Andrews and Withey 1976; Diener 1984; Ferrer‐i‐Carbonell and van Praag 2002). If stronger enforcement of patents on pharmaceuticals and medical technologies makes access to health care costlier, it could be argued that IPP might have a negative influence on well-being.
However, in Latin America, the emergence of pirated pharmaceuticals, which often do not conform to industry standards, represent a serious threat to public health (Ramírez 2012). While they are likely to be more accessible to the poor, the so called “counterfeit pharmaceuticals” sometimes contain harmful ingredients (Horan et al. 2005).Footnote 6 Stronger and more effective enforcement of anti-counterfeiting and anti-piracy laws in this sector could thus protect public health from this threat. Therefore, it is conceivable that this may have a positive impact on life satisfaction in the Latin American region.
Another possible linkage involves the issue of inequality, which is of particular importance in Latin America, the region with the highest inequality in the world (Torche 2014). While inequality has been associated with happiness in many different regions (Berg and Veenhoven 2010; Alesina et al. 2004), Graham and Felton (2006) found that this association between inequality and happiness is particularly strong in Latin America. Their examination provides conclusive evidence for strong effects of relative income differences on well-being. The authors posit that for the people in Latin America, inequality is perceived as a signal of persistent unfairness (Graham and Felton 2006). In a recent Latin American study, Torpey-Saboe et al. (2015) discovered that property rights could contribute to the alleviation of inequality in developing countries.
In summary, positive and negative associations between property rights, intellectual property protection and life satisfaction are conceivable.
Property rights, intellectual property protection and economic growth
A large and growing body of literature has investigated the relationship between property rights and economic growth (see, e.g., Acemoglu et al. 2001; Everest-Phillips 2008; Besley and Ghatak 2010; Bose et al. 2012; Haydaroğlu 2015) and there is a relatively large consensus among scholars that secure property rights are an important prerequisite for stable economic growth and development. There is rather more mixed evidence for the role of intellectual property protection in promoting economic growth. Both are discussed below.
The link between better property rights and economic growth has also been found for Latin America. In their cross-national study Staats and Biglaiser (2012) established a link between property rights enforcement and growth enhancing sources of foreign capital. The authors investigated this relationship in 17 Latin American countries and found that stable property rights can promote inflows of foreign direct investment and increase portfolio investment.
Regarding individual Latin American countries, Field (2005) investigated the relationship between tenure security and investment incentives in urban slums in Peru, using data from a nationwide land titling program.Footnote 7 Her examination revealed that strong property rights achieved through government land titling have a positive effect on residential investment, leading to a significant increase in the rate of housing renovation, with obvious benefits for economic growth. In a related study, referring to the same government land titling program, Field (2007) found that secure property rights reduce time spent on protecting property and allow household members to spend it on other activities. This freed up time can be supplied in the labour market and thus increases labour market participation leading to economic growth.
In a cross-country study, Park and Ginarte (1997) constructed an index for intellectual property rights (Ginarte-Park Index), which attempts to give a quantitative score to a country’s level of intellectual property protection. Using this index, they provided an examination of the relationship between patent protection and long-run economic growth for 60 countries for the period over 1960–1990 [now extended to 2005 (Park 2008)]. The results of their study show that strong intellectual property rights do not contribute to economic growth by “being codified into laws”, but rather by increasing investment possibilities; such investments then being associated with the stimulation of long-term growth (Park and Ginarte 1997, p. 60). Similarly, Gould and Gruben (1997) also identify an indirect effect of intellectual property rights on GDP: strong patent protection leads to improvements in factor accumulation (of factor inputs like R&D capital and physical capital) which in turn has an influence on economic growth. Their findings further suggest that it is important to distinguish between developed and developing countries (see also Thompson and Rushing 1996).
However, some authors consider the relationship between IPP and economic growth to be a bit more complex and not necessarily positive. For instance, Falvey et al. (2006) argue that providing strong IPP gives foreign firms patent advantage, which turns them for at least an initial period of time into a monopoly and thus reduces competition. This might result in an output below the socially desirable level of output and lead to consumer welfare loss. Adams (2011) and Horii and Iwaisako (2007) concluded that the ultimate effect of strong IPP protection on economic growth and development depends on the country’s level of economic development and other country-specific characteristics and give a similar explanation as Favley et al. (2006). According to Sattar and Mahmood (2011), the strength of the relationship depends on the country’s level of income. They found that the impact of IPP on GDP is more significant in high-income countries as compared to middle- and low-income countries. Furthermore, the effect is stronger in case of upper–middle-income countries in comparison to lower–middle income and low-income countries).
While the discussion above is general, it is conceivable that these associations may differ dependent upon the individual’s labour market status and the proportions of such groups in a country or region. In Latin America, larger informal sectors are generally associated with more self-employment (Tokman 2011): self-employment accounts for more than half (56%) of the total informal work (Biles 2009), where regulations and bureaucracy are sometimes seen as barriers to business. But self-employment is very diverse in the Latin American region, which makes it important to consider the other categories of self-employment too.
According to Tokman (2011), inadequate regulations and bureaucracy lead many micro-enterprises to flee to informal sectors. Furthermore, it is similarly argued that individuals who “voluntarily” work in informal sectors reject formality, which could potentially explain why the informally self-employed might not benefit from stronger intellectual property protection. Since strong regulations and bureaucracy lead them to informality in the first place, they might be against any increase in government intervention. Moreover, individuals who are active in the informal sector may be directly affected in their jobs and therefore not benefit, but instead suffer from stronger intellectual property protection.
There also might be different preferences within other groups of the self-employed. A business owner or entrepreneur, for instance, may benefit from stronger intellectual property protection as this could protect her from piracy and imitation, better facilitating the invention of new products as well as improvements of existing products and production processes. However, it could also be that self-employed business owners do not benefit from stronger intellectual property protection, because it is likely that purchasing intangible assets such as patents becomes more expensive (Jacobs 1998).
Our investigation is particularly interested in the relationship between these rights and protections, GDP growth and life satisfaction. The next section discusses the data and chosen method we use to empirically assess these associations.