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Parallel Imports and Price Controls

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Author Info
Gene M. Grossman
Edwin C.-L. Lai

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Abstract

Price controls create opportunities for international arbitrage. Many have argued that such arbitrage, if tolerated, will undermine intellectual property rights and dull the incentives for investment in research-intensive industries such as pharmaceuticals. We challenge this orthodox view and show, to the contrary, that the pace of innovation often is faster in a world with international exhaustion of intellectual property rights than in one with national exhaustion. The key to our conclusion is to recognize that governments will make different choices of price controls when parallel imports are allowed by their trade partners than they will when they are not.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12423.

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Date of creation: Aug 2006
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Handle: RePEc:nbr:nberwo:12423

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Find related papers by JEL classification:
O34 - Economic Development, Technological Change, and Growth - - Technological Change - - - Intellectual Property Rights
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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References listed on IDEAS
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  1. Gene M. Grossman & Edwin L.-C. Lai, 2004. "International Protection of Intellectual Property," American Economic Review, American Economic Association, vol. 94(5), pages 1635-1653, December. [Downloadable!]
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  2. Keith E. Maskus, 2000. "Parallel Imports," The World Economy, Blackwell Publishing, vol. 23(9), pages 1269-1284, 09. [Downloadable!] (restricted)
  3. Stefan Szymanski & Tommaso Valletti, 2005. "Parallel trade, price discrimination, investment and price caps," Economic Policy, CEPR, CES, MSH, vol. 20(44), pages 705-749, October. [Downloadable!] (restricted)
  4. Grossman, Gene & Lai, Edwin, 2002. "International Protection of Intellectual Property," CEPR Discussion Papers 3118, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Li, Changying & Maskus, Keith E., 2006. "The impact of parallel imports on investments in cost-reducing research and development," Journal of International Economics, Elsevier, vol. 68(2), pages 443-455, March. [Downloadable!] (restricted)
  6. Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September. [Downloadable!] (restricted)
  7. Patricia M. Danzon, 1998. "The Economics of Parallel Trade," PharmacoEconomics, Wolters Kluwer Health | Adis, vol. 13(3), pages 293-304. [Downloadable!] (restricted)
  8. Pecorino, Paul, 2002. "Should the US allow prescription drug reimports from Canada?," Journal of Health Economics, Elsevier, vol. 21(4), pages 699-708, July. [Downloadable!] (restricted)
  9. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November. [Downloadable!] (restricted)
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  10. Gene M Grossman & Edwin L Lai, 2004. "International Protection of Intellectual Property," Levine's Working Paper Archive 122247000000000442, David K. Levine. [Downloadable!]
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