Parallel imports and price controls

Gene M. Grossman, Edwin L.-C. Lai

Research output: Contribution to journalArticlepeer-review

70 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)378-402
Number of pages25
JournalRAND Journal of Economics
Volume39
Issue number2
DOIs
StatePublished - Jun 2008

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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