Parallel Imports and Price Controls

Gene Grossman () and Edwin C.-L. Lai

No 12423, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: O34 F13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-reg
Date: 2006-08
Note: ITI POL
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