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The Strategic Effects of Parallel Trade～Market stealing and wage cutting～

Author

Listed:
  • Arijit Mukherjee

    (School of Economics, University of Nottingham (UK) and The Leverhulme Centre for Research in Globalisation and Economic Policy, University of Nottingham (UK))

  • Laixun Zhao

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

Abstract

Why do producers often accept parallel trade in some markets such as automobiles, clothing, toys and consumer electronics? This paper identifies two new factors, viz., market stealing and union-wage cutting, which may make parallel trading beneficial to a manufacturer. Specifically, (i) under perfectly competitive labour markets in both the home and foreign countries, parallel trade may help a manufacturer to steal market shares from competitors, if it is more cost efficient or sells in more markets than competitors; and (ii) in a unionized labour market, parallel trade may help by lowering the unionized wage. These benefits of parallel trade disappear when such factors are removed.

Suggested Citation

  • Arijit Mukherjee & Laixun Zhao, 2010. "The Strategic Effects of Parallel Trade～Market stealing and wage cutting～," Discussion Paper Series DP2010-09, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2010-09
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2010-09.pdf
    File Function: First version, 2010
    Download Restriction: no
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    More about this item

    Keywords

    Firm-asymmetry; Labour Union; Parallel import;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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