IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-17-00834.html
   My bibliography  Save this article

Parallel Imports, Product Quality and Endogenous Trading Bloc Formation

Author

Listed:
  • Sunandan Ghosh

    (Centre For Development Studies)

Abstract

This paper analyzes the role of parallel imports (PIs) in determining both optimal product quality and optimal trade policy. We consider a three country world economy, where poor (P) and middle-income (M) countries import a vertically differentiated good produced and exported by a patent holder monopolist in the rich country (R), when PIs are allowed. In presence of both inter and intra-country taste diversity, PIs lower the level of innovation irrespective of tariff regimes vis-Ã -vis when PIs are not allowed. The optimal tariff levels imposed by the importing countries are lower under PIs irrespective of the tariff regimes. Formation of a Free Trade Area (FTA) by R is feasible with side-payments to its FTA partner given intra-country taste diversity. A customs union (CU) among the importing countries turns out to be globally Pareto superior given both inter and intra-country taste diversity. The level of innovation is highest under such CU as compared to all other tariff regimes.

Suggested Citation

  • Sunandan Ghosh, 2018. "Parallel Imports, Product Quality and Endogenous Trading Bloc Formation," Economics Bulletin, AccessEcon, vol. 38(3), pages 1415-1427.
    • Handle: RePEc:ebl:ecbull:eb-17-00834
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2018/Volume38/EB-18-V38-I3-P133.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gene M. Grossman & Edwin L.‐C. Lai, 2008. "Parallel imports and price controls," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 378-402, June.
    2. Jung Hur & Yohanes E. Riyanto, 2006. "Tariff policy and exhaustion of intellectual property rights in the presence of parallel imports," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 549-568, July.
    3. Izabela Jelovac & Catalina Bordoy, 2005. "Pricing and Welfare Implications of Parallel Imports in the Pharmaceutical Industry," International Journal of Health Economics and Management, Springer, vol. 5(1), pages 5-21, January.
    4. Acharyya, Rajat, 1998. "Monopoly and product quality: Separating or pooling menu?," Economics Letters, Elsevier, vol. 61(2), pages 187-194, November.
    5. Rajat Acharyya & María D.C. García-Alonso, 2008. "Parallel Imports, Innovations And National Welfare: The Role Of The Sizes Of Income Classes And National Markets For Health Care," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(01), pages 57-79.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Acharyya, Rajat & García-Alonso, María D.C., 2012. "Income based price subsidies and parallel imports," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 25-41.
    2. Chatterjee, Tonmoy & Gupta, Kausik, 2016. "Health Care Quality, Income Transfer and International Trade: A Theoretical Analysis," MPRA Paper 73128, University Library of Munich, Germany.
    3. Tomaso Duso & Annika Herr & Moritz Suppliet, 2014. "The Welfare Impact Of Parallel Imports: A Structural Approach Applied To The German Market For Oral Anti‐Diabetics," Health Economics, John Wiley & Sons, Ltd., vol. 23(9), pages 1036-1057, September.
    4. Brekke, Kurt R. & Holmås, Tor Helge & Straume, Odd Rune, 2015. "Price regulation and parallel imports of pharmaceuticals," Journal of Public Economics, Elsevier, vol. 129(C), pages 92-105.
    5. Laura Birg, 2023. "Pharmaceutical regulation under market integration through parallel trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 56(4), pages 1322-1346, November.
    6. Frank Mueller‐Langer, 2012. "Parallel Trade and its Ambiguous Effects on Global Welfare," Review of International Economics, Wiley Blackwell, vol. 20(1), pages 177-185, February.
    7. Rajat Acharyya & María D. C. García-Alonso, 2014. "Universal Access, Parallel Trade And Incentives To Innovate," Bulletin of Economic Research, Wiley Blackwell, vol. 66(S1), pages 74-91, December.
    8. Joan Costa-i-Font, 2015. "Is Medicines Parallel Trade ‘Regulatory Arbitrage’?," CESifo Working Paper Series 5190, CESifo.
    9. Rajat Archaryya & María del Carmen García-Alonso, 2009. "Health Systems, Inequality and Incentives to Innovate," Studies in Economics 0902, School of Economics, University of Kent.
    10. Mueller-Langer, Frank, 2010. "An analysis of the ambiguous welfare effects of parallel trade freedom," MPRA Paper 35704, University Library of Munich, Germany.
    11. Andrea Mantovani & Alireza Naghavi, 2010. "Parallel Imports and Innovation in an Emerging Economy," Center for Economic Research (RECent) 038, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    12. Andrea Mantovani & Alireza Naghavi, 2012. "Parallel Imports And Innovation In An Emerging Economy: The Case Of Indian Pharmaceuticals," Health Economics, John Wiley & Sons, Ltd., vol. 21(11), pages 1286-1299, November.
    13. Joan Costa-Font, 2016. "Is medicines parallel trade ‘regulatory arbitrage’?," International Journal of Health Economics and Management, Springer, vol. 16(4), pages 321-336, December.
    14. Bennato, Anna Rita & Valletti, Tommaso, 2014. "Pharmaceutical innovation and parallel trade," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 83-92.
    15. Rajat Acharyya & María D.C. García-Alonso, 2012. "Parallel imports, drug innovation and international patent protection: A policy game," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(6), pages 865-894, November.
    16. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters, in: Richard Watt (ed.), Handbook on the Economics of Copyright, chapter 16, pages 287-310, Edward Elgar Publishing.
    17. Rajat Acharyya & Maria D.C. Garcia-Alonso, 2008. "Income-Based Price Subsidies, Parallel Imports and Markets Access to New Drugs for the Poor," Studies in Economics 0820, School of Economics, University of Kent.
    18. Nikolaos Zevgolis & Panagiotis Fotis, 2014. "Prohibition of parallel imports as a vertical restraint: per se approach or a misunderstanding?," European Journal of Law and Economics, Springer, vol. 38(2), pages 317-342, October.
    19. Charitini Stavropoulou & Tommaso Valletti, 2015. "Compulsory licensing and access to drugs," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(1), pages 83-94, January.
    20. Giorgio Matteucci & Pierfrancesco Reverberi, 2017. "Drug innovation, price controls, and parallel trade," International Journal of Health Economics and Management, Springer, vol. 17(2), pages 159-179, June.

    More about this item

    Keywords

    Parallel Imports; Endogenous Product Quality; Trading Bloc; Intra-country Taste Diversity;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-17-00834. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.