Crossâ€ border Travellers and Parallel Trade: Implications for Asian Economies
Chiâ€ Chur Chao,
Pasquale Sgro () and
The World Economy, 2017, vol. 40, issue 8, 1531-1546
This paper explores the impact of parallel trade in an export market by crossâ€ border travellers on welfare of the home country in a model with heterogeneous consumers' perceptions. We show that such parallel trade when it is organised trading always hurts the homeâ€ country welfare. However, when parallel trade is unorganised trading, it might benefit the homeâ€ country welfare provided that the size of the export market is relatively small. Along these lines, we suggest optimal policy responses in the home country to parallel trade by crossâ€ border travellers. The results of the paper yield insightful policy implications for Asian economies.
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