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Benefits To Economy More Broadly

Benefits To Economy More Broadly

IP-dependent sectors make a significant contribution to the economy, create employment and generate tax revenues.

There are tremendous benefits to be realised in national and regional economies in those segments of the economy that rely on a healthy intellectual property system. The European Commission, for example, estimated that the content industries (covering print and online publications, music, film, software and other similar works) contributed more than €1,200 billion to the economy of the European Union, produced value added of €450 billion and contributed approximately 5.3% to the EU’s GDP in 2000. At the national level, the British government reports that more than 8% of UK GDP and 4% of its exports depend on the content industries. These industries are estimated to account for more than 6.5% of the GDP of the United States (Siwek, Copyright Industries in the US Economy (2006)). Entire industries and literally millions of employees depend on andm benefit from intellectual property

protection. The software and broader information and communication technology (ICT) sectors in particular are heavily dependent on patents, copyrights, trade secrets and other intellectual property protections, and contribute greatly to economies all over the world. The software industry alone generates US$1.7 trillion in annual economic activity, supports 1.1 million businesses, employs 11 million workers and pays US$900 billion in taxes annually to governments worldwide (IDC/BSA 2005). These benefits are not limited to developed countries. Since India reformed its IP and other laws in the late 1990s, for example, its software and services industry has grown to be among the largest employers, directly employing more than 1.6 million people and indirectly creating employment opportunities for an additional 6 million people in related industries (NASSCOM 2007). It is obvious that in many IP-based sectors, the employment created involves highly skilled, high value-added jobs. In the US, for example, the 2005 average annual compensation per worker was US$69,839 across all core copyright industries and US$66,727 among the total copyright industries (Siwek 2006). The GDP, employment and other gains that the IP-dependent sectors produce for the economy are not limited to those sectors. Healthy IP-based industries also drive economic activity, employment and taxes in their related upstream and downstream markets. The software sector provides an excellent example. For every software publisher that develops and produces computer programs directly, there is a range of other upstream and downstream businesses related to that software. On the downstream side, this includes resellers of that particular software, resellers of other software that works with it, sellers of services for the software (installation, customisation, maintenance, etc), and sellers of other products required to use the software (computers, peripherals, etc). IDC estimates this multiplier effect to mean, for example, that for every euro that Microsoft makes in sales of Windows Vista, other companies make €13.30 in revenues from related software, hardware and services (IDC, The Economic Impact of Microsoft Windows Vista (2006)). This translates into additional employment and tax revenues in those upstream and downstream businesses – an effect relevant to other IP-dependent sectors as well. The positive effect of the IP-dependent ICT sector reaches well beyond its upstream and downstream businesses to the economy more widely. A recent economic and policy study commissioned by the ICT industry body CompTIA found that:

  • ICT industries accounted for one-third to one-half of the total GDP growth experienced in the 1990s in 10 countries surveyed worldwide.
  • A healthy ICT industry increases the GDP output of non-ICT sectors as well as its own.
  • Economies with high levels of ICT use experience labour productivity that is seven times higher on average than productivity in countries with low ICT use.
  • GDP and productivity growth accelerate as ICT use grows.
  • ICT use produces widespread development benefits for society and daily life.

These include benefits for education, healthcare, public safety and national defense, e-government and infrastructure, and poverty alleviation (Dixon, Sallstrom et al, The Economic and Societal Benefits of ICT Use (2007)). It is small wonder that countries such as Singapore, India and China, and now nations such as Chile and Mexico, have seized the initiative and focused resources, education and other public policies (including IP protection) on promoting the software industry and other IP-dependent ICT-based sectors. Singapore began doing this 20 years ago and is now a world renowned high-tech centre. India’s software and services business revenue hit approximately US$50 billion in 2008.

[This is an excerpt from the publication released by WIPO called The Role of IP in Promoting Economic Growth through Innovation. To read the complete publication, please visit the Download menu to get a copy]