equilibrium parallel import policies and international market structure in a north south vertically differentiated duopoly the analysis in this paper derives equilibrium government policies towards parallel imports by incorporating strategic interaction at the policy setting stage and the product market the model sheds new light on i the effects of parallel import policies on pricing behavior of firms and ii the interdependence of national parallel import policies if demand asymmetry across countries is sufficiently large the north forbids parallel imports to ensure its firm sells in the south thereby generating international price discrimination the south s most preferred market outcome as the equilibrium when demand structures are relatively similar across countries the north permits parallel imports and uniform pricing its most preferred market outcome obtains

developing and distributing essential medicines to poor countries the defend proposal the poorest nations of the world suffer from extreme disease burdens which go largely untreated because weak incomes and the prevailing system of intellectual property rights fail to provide sufficient incentives to develop new treatments and distribute them at low cost recent price reductions for hiv aids drugs are encouraging but offer only a limited solution we discuss the economic tradeoffs involved in supporting drug and vaccine research through exclusive rights and distributing the fruits of that research to poor countries we offer a proposal to overcome these incentive problems our defend developing economies fund for essential new drugs proposal would work within the existing international legal structure but significantly would raise the returns to r d in critical medicines and expand distribution programs a public international organization would purchase the license rights for designated areas and distribute the drugs at low cost with a required co payment from local governments furthermore governments would restrict parallel trade to support desirable price discrimination costs would be funded largely by increased foreign assistance from the developed nations but these costs would be low in relation to current aid budgets we believe a strong program could be mounted for 8 billion to 12 billion per year and would be an extremely effective use of foreign aid this abstract was borrowed from another version of this item

international effects of national regulations external reference pricing and price controls under external reference pricing erp the price that a government permits a firm to charge in its market depends upon the firm s prices in other countries in a two country home and foreign model where demand is asymmetric across countries we show that home s unilaterally optimal erp policy permits the home firm to engage in a threshold level of international price discrimination above which it is just willing to export if the firm faces a price control abroad or bargains over price with the foreign government an erp policy can even yield higher home welfare than a direct price control

estimating the effects of global patent protection in pharmaceuticals a case study of quinolones in india under the trips agreement wto members are required to enforce product patents for pharmaceuticals the debate about the merits of this requirement has been extremely contentious many low income economies claim that patent protection for pharmaceuticals will result in substantially higher prices for medicines with adverse consequences for the health and well being of their citizens on the other hand research based global pharmaceutical companies argue that prices are unlikely to rise significantly because most patented products have therapeutic substitutes in this paper we empirically investigate the basis of these claims central to the ongoing debate is the structure of demand for pharmaceuticals in poor economies where because health insurance coverage is so rare almost all medical expense are met out of pocket using a detailed product level data set from india we estimate key price and expenditure elasticities and supply side parameters for the fluoroquinolones sub segment of the systemic anti bacterials i e antibiotics segment of the indian pharmaceuticals market we then use these estimates to carry out counterfactual simulations of what prices profits and consumer welfare would have been had the fluoroquinolone molecules we study been under patent in india as they were in the u s at the time our results suggest that concerns about the potential adverse welfare effects of trips may have some basis we estimate that in the absence of any price regulation or compulsory licensing the total annual welfare losses to the indian economy from the withdrawal of the four domestic product groups in the fluoroquinolone sub segment would be on the order of u s 450 million or about 73 of the sales of the entire systemic anti bacterials segment in 2000 of this amount foregone profits of domestic producers constitute roughly 50 million or 11 the overwhelming portion of the total welfare loss therefore derives from the loss of consumer welfare in contrast the profit gains to foreign producers in the absence of any price regulation are estimated to be only around 53 million per year

the benefits and costs of strong patent protection a contribution to the current debate abstract today s conventional wisdom is that strong patent rights are conducive to economic progress yet not long ago students of the patent system took a more nuanced position arguing that often strong patents were not necessary to induce invention and entailed significant economic costs several empirical studies have supported this position however the current advocacy invokes theories of the positive benefits of patents that were repressed in the earlier more negative analyses this essay reviews these theories and the empirical evidence that might bear on them the authors conclude that there is reason for concern that the present movement towards stronger patent protection may hinder rather than stimulate technological and economic progress

technical change sectoral dislocation and barriers to labor mobility factors behind the great recession abstract the global financial and economic crisis which began in late 2007 great recession is the worst international crisis since 1929 great depression and still affects many countries this paper attempts to determine if the theory of extended crises presented by delli gatti et al 2012 is consistent with empirical evidence the analysis is carried out using two approaches the first part of the paper is purely descriptive and is dedicated to a comparison between structural differences and different patterns of development in six countries france germany italy spain uk and us using data on the major world economies klems and stan since 1970 we show that the fundamentals behind the extended crisis theory apply to these economies we focus particularly on italy germany and the us among large economies italy is one of the most affected and still not recovering even though the italian financial sector appeared to have been less exposed to the 2008 shock than other countries the crisis in italy could be directly connected to the failure of the italian economy to move to an economic system based on more skill intensive production in particular in the service sector as in the us the us financial sector was extremely exposed to the 2008 sub prime crisis but us economy recovered much faster than in many european countries germany is the leading european economy generally considered in european public debate as the example to be followed in the last part of the paper the analysis is broadened involving more countries in a panel analysis approach different specifications of panel probit logit models are presented in a first attempt to investigate the roles of both structural features and financial shock in explaining the extent of the crisis in different countries

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

pharmaceutical price controls and entry strategies abstract this paper finds that the use of price controls has a statistically and quantitatively important effect on the extent and timing of the launch of new drugs firms headquartered in countries that regulate price reach fewer markets than those in countries without price controls companies avoid price controlled markets and are less likely to introduce products in additional markets after entering a price controlled country launches into low price european countries are further delayed following legalization of parallel imports the results suggest that price regulation in one country affects entry into other countries and may affect the strategies of domestic firms

characteristics of demand for pharmaceutical products an examination of four cephalosporins we model demand for four cephalosporins and compute own and cross price elasticities between branded and generic versions of the four drugs we model demand as a multistage budgeting problem and we argue that such a model is appropriate to the multistage nature of the purchase of pharmaceutical products in particular the prescribing and dispensing stages we find quite high elasticities between generic substitutes and also significant elasticities between some therapeutic substitutes

strategic pricing of new pharmaceuticals this paper provides empirical evidence on the leading factors affecting the prices of new pharmaceuticals both at introduction and after 4 6 and 8 years most important is the extent of therapeutic advance embodied in a new product for drugs which represent important therapeutic gains launch prices can be two or three times those of existing drugs used for the same purposes while drugs that largely duplicate the actions of currently available products are typically priced at comparable levels in addition the number of branded substitutes has a substantial negative effect on launch prices which reflects the importance of competitive pressures duplicate products thereby play an important economic role in pharmaceutical markets

the effect of intellectual property rights on domestic innovation in the pharmaceutical sector summary there is little empirical evidence concerning the effect of intellectual property rights ipr protecting pharmaceutical products and processes on pharmaceutical domestic innovation indeed existing literature does not provide a punctual estimate of this effect for developing countries this paper fills this gap by exploiting a self constructed dataset which provides for a 22 year period information concerning ipr reforms involving pharmaceuticals for 74 developed and developing countries the identification strategy exploits the different timing across these countries of two sets of ipr reforms domestic innovation is measured as citation weighted domestic patent applications filed at the european patent office epo the highly skewed distribution of the dependent variable and the high number of zero observations are taken into account using count data models in particular a zero inflated negative binomial model is adopted to overcome previous literature assumption that all innovations are patented in the main markets of reference and to take into consideration the choice not to patent at the epo results show that innovation is sensitive to ipr protection but not to its degree moreover the effect is not long lasting my study also finds that developing countries profit significantly less than developed ones from the protection benefiting from an effect that is roughly half of that for developed countries consequent policy implications are examined and include the conclusions that a one size fits all approach can be inappropriate and that gradual reforms should be preferred to rare reforms that greatly alter the level of ipr protection

pharmaceutical patents prices and welfare losses policy options for india under the wto trips agreement c oncerns on the effect of product patents on the prices of medicines have been acute in many developing countries which up to the entry into force of the world trade organisation wto agreement on trade related aspects of intellectual property rights trips in 1995 could and did disallow such patenting in their national patent laws with trips all members of and those seeking accession to the wto have to make available with limited exceptions both product and process patents in every sector including pharmaceuticals more specifically trips provides that all wto members have to receive product patent applications for pharmaceuticals from the date of establishment of the wto i e january 1995 it is important to note that even under the trips regime patents are to be granted only on applications received from 1995 onwards for new patentable pharmaceutical inventions thus prices of existing pharmaceuticals already on the market or even those covered by patent

welfare effects of global patent protection this paper uses a simple model of invention and patent protection to examine the welfare effects of extending patent protection from the country where invention takes place to another country that is only a consumer of invented products it is shown that while the welfare of the inventing country certainly rises with the extension of patent protection that of the other country probably falls and may well fall by more than the increase in welfare of the inventing country in particular as patent protection is extended to a larger and larger portion of the world the effect on the welfare of the world as a whole of extending it to the rest of the world becomes negative

compulsory licensing price controls and access to patented foreign products abstract we analyze how a price control and the threat of compulsory licensing cl affect consumer access in a developing country south to a patented foreign product in the model the southern government sets the level of the price control on a northern patent holder who chooses between entry and voluntary licensing vl while entry incurs a higher fixed cost licensed production is of lower quality if the patent holder does not work its patent locally the south is free to use cl the threat of cl ensures that consumers have access to a lower quality version of the patented good when the patent holder chooses not to work its patent locally improves the terms at which vl occurs can cause the patent holder to switch from vl to entry and can delay consumer access when cl replaces vl or entry we also show that a price control and cl are mutually reinforcing instruments

inflation and relative price variability reinstating parks results this paper revisits parks seminal work on the time series relationship between inflation and relative price variability the results reported show that a significant positive association is obtained allowing for an asymmetrical response of relative prices to episodes of positive and negative inflation this finding is maintained after excluding oil shock years extending park s original sample to 1996 using an alternative data set and allowing for a higher degree of disaggregation

new pills for poor people empirical evidence after gatt abstract the protection of pharmaceutical innovations is being dramatically extended as much of the developing world introduces patent protection for new drug products this change in intellectual property rights may lead to more research on drugs to address developing country needs we use new survey data from india the results of interviews and measures of research and development r d constructed from a variety of statistical sources to determine trends in the allocation of research to products specific to developing country markets there is some although limited evidence of an increase in the mid to late 1980s which appears to have leveled off in the 1990s the picture presented provides a baseline against which future patterns in research activity can be compared

alfred marshall lecture intellectual property rights protection in developing countries the case of pharmaceuticals patent enforcement in developing countries generates considerable controversy especially when patents involve potentially life saving drugs this paper argues that common concerns regarding the effects of patents on prices and on research incentives of pharmaceutical multinationals are misplaced rather the most significant effects are likely to concern access to patented drugs in poor countries because prices in developing countries are much lower than in the developed world multinationals may choose to enter such markets with a delay or not at all implying a complete loss of access to patented drugs in developing countries even when multinationals enter countries like india their marketing and distribution networks are not currently built out leading to limited access within the country such considerations may provide a justification for policies targeting access in the short and medium run such as compulsory licensing

international protection of intellectual property we study the incentives that governments have to protect intellectual property in a trading world economy we consider a world economy with ongoing innovation in two countries that differ in market size and in their capacities for innovation after describing the determination of national patent policies in a non cooperative regime of patent protection we ask why is intellectual property better protected in the north than in the south we also study international patent agreements by deriving the properties of an efficient global regime of patent protection and asking whether harmonization of patent policies is necessary or sufficient for global efficiency jel o34 f13 during the 1980 s and early 1990 s the united states and several european countries expressed strong dissatisfaction with what they deemed to be inadequate protection of intellectual property in many developing countries the developed countries made the upgrading of intellectual property rights iprs one of their highest priorities for the uruguay round of trade talks their efforts bore fruit in the agreement on traderelated aspects of intellectual property rights trips which was approved as part of the final act of the uruguay round trips establishes minimum standards of protection for several categories of intellectual property for example in the area of new technology it essentially harmonizes

product differentiation and oligopoly in international markets the case of the u s automobile industry this paper develops and estimates a model of the u s automobile industry on the demand side a discrete choice model is adopted that is estimated using micro data from the consumer expenditure survey the estimation results are used in conjunction with population weights to derive aggregate demand on the supply side the automobile industry is modelled as an oligopoly with product differentiation equilibrium is characterized by the first order conditions of the profit maximizing firms the estimation results are used in counterfactual simulations to investigate two trade policy issues the effects of the ver and exchange rate pass through

the consumer welfare implications of governmental policies and firm strategy in markets for medicines this paper empirically examines the consumer welfare implications of changes in government policies related to patent protection and compulsory licensing in the indian market for oral anti diabetic oad medicines in contrast to previous studies on the impact of pharmaceutical patents in india we observe and estimate the welfare effects accruing from differential pricing and voluntary licensing strategies of patent holding innovator firms three novel molecules belonging to the dipeptidyl peptidase 4 dpp 4 inhibitor class of oads have been launched in india by the patent holders at lower prices than those prevailing in the developed countries using aggregate market transaction data we structurally estimate demand and supply and use the parameter estimates in our model to simulate consumer welfare under various counterfactual scenarios our results suggest that the introduction of dpp 4 inhibitors generated a consumer surplus gain of around 7 6 cents per day for a typical dpp 4 inhibitor user under the existing differential pricing and voluntary licensing strategies if the innovators decide to price at developed country levels this surplus is eliminated almost entirely the issuance of compulsory licensing does not always improve consumer welfare because if innovators defer or delay the introduction of new drugs in response the loss in consumer welfare could be substantial