This article investigates the determinants of international technology licensing using data for 50 countries during 1996–2012. A multicountry model of innovation yields a dynamic structural gravity equation for royalty payments as a function of fundamentals, including imperfect intellectual property protection and differences in corporate taxation. The gravity equation is estimated with nonlinear methods. My model’s fundamentals account for about 60% of the variation in royalty payments. A quantitative analysis sheds light on the impact of global taxation reforms on international technology licensing and innovation. The findings highlight the role of taxation in shaping cross-border technology flows and the consequences of profit-shifting.

I develop a quantitative theory of bilateral trade agreements with intellectual property (IP) provisions in a multicountry growth model. The model’s dynamics are driven by innovation and technology licensing. Imperfect IP enforcement leads to reduced royalty payments and growth. Governments negotiate tariffs and IP enforcement through Nash bargaining. Gains from the trade agreement vary along the transition. Developing countries experience short-term losses, while developed countries gain in both the short and long runs. A government with short-term goals may reduce losses but at the cost of lower growth and welfare. Tariffs could discourage developing countries from deviating from the agreement.

We study the international propagation of long-run risk in the context of a general equilibrium model with endogenous growth. Innovation and international diffusion of technologies are the channels at the core of our mechanism. A calibrated version of the model matches several asset pricing and macroeconomic quantity moments, alleviating some of the puzzles highlighted in the international macro-finance literature. Our model predicts that country pairs that share more research and development (R&D) have less volatile exchange rates and more correlated stock market returns. Using data from a sample of 19 developed countries, we provide suggestive empirical evidence in favor of our model’s predictions.