Vertical Distribution, Parallel Trade, and Price Divergence in Integrated Markets

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports (PI). The manufacturing firm needs to set these two prices to balance three competing interests: restricting competition in the PI-recipient market, avoiding resource wastes due to actual trade, and reducing the double-markup problem in the PI-source nation. These trade-offs imply the counterintuitive result that both wholesale and retail prices could diverge as a result of declining trading costs, even as the volume of PI increases. Thus, in some circumstances it may be misleading to think of PI as an unambiguous force for price integration

Wage differentials and their determinants in US tourism and tourism-associated industries

This paper examines variations in wages for tourism related industries in the US for the period 2004-2009. It critically assesses the extent to which tourism related activities conform to their low wage stereotype and finds this to be true in general but not universally. It then considers the possibility that wages in US tourism related industries can be explained by observable characteristics of these industries. Recent research has suggested that the use of wage data at the level of highly detailed occupations is an effective alternative to other ways of capturing underlying skill differences. In line with this literature data from the US Occupational Employment Statistics (OES) were used to provide this detail. The results strongly support the importance of difference between occupations in wages in understanding differences between industries. They also support the importance of a number of industry characteristics including profitability, multi-factor productivity and demand growth. The paper also considers the relevance of an industry wage premium or discount for tourism related activities in the US over the same period. To assess this it estimates an industry wage model separately for five individual occupations across all industries which employ the occupation concerned. Within the small number of occupations covered the analysis find that workers in the two more highly paid occupations exhibit evidence of a tourism related discount but that workers in the three more lowly paid occupations exhibit a tourism related wage premium

Intellectual Property Rights, Parallel Imports and Strategic Behavior

The existence of parallel imports (PI) raises a number of interesting policy and strategic questions, which are the subject of this survey article. For example, parallel trade is essentially arbitrage within policy-integrated markets of IPR-protected goods, which may have different prices across countries. Thus, we analyze fully two types of price differences that give rise to such arbitrage. First is simple retail-level trade in horizontal markets because consumer prices may differ. Second is the deeper, and more strategic, issue of vertical pricing within the common distribution organization of an original manufacturer selling its goods through wholesale distributors in different markets. This vertical price control problem presents the IPR-holding firm a menu of strategic choices regarding how to compete with PI. Another strategic question is how the existence of PI might affect incentives of IPR holders to invest in research and development (R&D). The global research-based pharmaceutical firms, for example, strongly oppose any relaxation of restrictions against PI of drugs into the United States, arguing that the potential reduction in profits would diminish their ability to innovate. There is a close linkage here with price controls for medicines, which are a key component of national health policies but can give rise to arbitrage through PI. We also discuss the complex economic relationships between PI and other forms of competition policy, or attempts to limit the abuse of market power offered by patents and copyrights. Finally, we review the emerging literature on how policies governing PI may affect international trade agreements

Pharmaceutical Cost-Sharing Systems and Savings for Health Care Systems from Parallel Trade

This paper analyzes the consequences of parallel trade on health care systems in a two-country model with a vertical distributor relationship. In particular, two cost-sharing systems - coinsurance and indemnity insurance - are compared with respect to changes in copayments and public health expenditure. Under both cost-sharing systems, parallel trade generates a price-decreasing competition effect in the destination country and a price-increasing double marginalization effect in the source country. In the destination country, copayments for patients decrease to a larger extent under indemnity insurance, whereas reductions of public health expenditure occur only under coinsurance. In the source country, copayments increase less under coinsurance, whereas health expenditure is reduced more under indemnity insurance. This illustrates that a harmonization of health care systems would not make sense

External sources of clean technology: evidence from the clean development mechanism

New technology is fundamental to sustainable development. However, inventors from industrialized countries often refuse technology transfer because they worry about reverse-engineering. When can clean technology transfer succeed? We develop a formal model of the political economy of North–South technology transfer. According to the model, technology transfer is possible if (1) the technology in focus has limited global commercial potential or (2) the host developing country does not have the capacity to absorb new technologies for commercial use. If both conditions fail, inventors from industrialized countries worry about the adverse competitiveness effects of reverse-engineering, so technology transfer fails. Data analysis of technology transfer in 4,894 projects implemented under the Kyoto Protocol’s Clean Development Mechanism during the 2004–2010 period provides evidence in support of the model

Does regulation drive international research cooperation? Evidence from the pharmaceutical sector

To what extent is an increased stringency of the Intellectual Property Rights (IPR) system apt to stimulate research cooperation between developed and emerging economies? To address this question, we empirically investigate how international joint research projects in the pharmaceutical sector are affected by the regime of IPR in force in the two countries involved in the collaboration. Looking at the joint signature of both patent documents and scientific articles by researchers located in developed and emerging markets, our investigation indicates two opposite effects: joint publications are fostered by stricter IPR rules, whereas joint patents are discouraged. A recently proposed theory provides a plausible rationale for this apparently contradicting result

Intellectual property management and technological entrepreneurship

This paper investigates the distinctive technology protection strategies of entrepreneurial technology firms. In contrast with much popular opinion, it is reported that intellectual property features more prominently in the business of small entrepreneurial firms than it does in the business of large, established mature firms. The intellectual property portfolios of technology firms of all sizes and ages exhibit a rich array of instruments in addition to patents for protecting technology, including trade secrets, trademarks and copyright, together with licenses to externally sourced technology. The intellectual property profiles of technology firms appear to be influenced by their context, organizational profiles and corporate goals and by the character of their technology

Is Bayh-Dole Good for Developing Countries? Lessons from the US Experience

The US Bayh-Dole Act encourages university patenting of inventions arising from publicly funded research. Lessons from three decades of US experience serve as a cautionary tale for those countries that may choose to emulate Bayh-Dole

Bilateral intra-industry trade flows and intellectual property rights protections: further evidence from the United Kingdom

This paper investigates the relationship between the United Kingdom's (hereafter referred as UK) bilateral intra-industry trade (IIT) and foreign intellectual property rights (IPRs) protections. The empirical investigation is based on pooled UK data and benefits from the theoretical distinction between horizontal and vertical IIT. It also estimates a gravity equation for international trade using both fixed and random effects models. We then extend the analysis by employing the GMM system for dynamic panel models. The principal findings suggest that the UK's IIT is stimulated when the level of a trading partner's IPRs and its imitative ability are considered jointly. However, when IPRs and imitation abilities are considered separately, their disparate effects are not an important factor in determining UK IIT flows