patent protection in developing countries and global welfare wto obligations versus flexibilities abstract this paper develops a north south model to evaluate the south s incentive for patent protection when a northern firm s investment in quality enhancing research and development r d is affected by its patent policy the model is used to a evaluate the impact of requiring the south to fulfill its key wto obligation of instituting patent protection and b to address the role of two major flexibilities that wto members enjoy with respect to their patent policies the freedom to implement exhaustion policies of their choosing and the right to use compulsory licensing cl subject to certain stipulations two forces drive the model how much the firm invests in r d and whether or not selling in the south maximizes its global profit cl improves consumer access in the south and can even raise innovation and global welfare provided the south implements patent protection innovation and welfare are higher if the north follows national as opposed to international exhaustion however the south s incentive for patent protection is not necessarily stronger under national exhaustion not only is cl more likely to be used under international exhaustion the welfare gain resulting from its application is also higher relative to that under national exhaustion

policy watch infrastructure investment and economic growth in the late 1980s david aschauer 1989 triggered a long overdue dialogue among economists and political leaders when he published a study arguing that much of the decline in u s productivity that occurred in the 1970s was precipitated by declining rates of public capital investment my own work confirmed these results munnell 1990a spending advocates seized on these findings as support for increased public investment the enthusiasm among policymakers for the early aschauer results was matched if not surpassed by skepticism on the part of many economists critics of these studies charged that the methodology was flawed that the direction of causation between public investment and output growth is unclear and that even if the historical empirical relationships were estimated correctly they provide no clear indications for current policy who s right what do we know and not know about the link between public infrastructure and productivity and what are the implications of these results for policy

the effect of public capital in state level production functions reconsidered using a panel data set for the forty eight contiguous states from 1970 to 1983 several estimates are provided of a cobb douglas production function with three types of public capital as inputs various specification tests are systematically applied to test for both random and fixed state effects nonstationarity endogeneity of the private inputs and measurement error in the preferred specification which is first differences with fixed state effects the public capital variables are not significant while the fixed state effects and private input variables are significant copyright 1996 by mit press

the role of public capital in production the impact of the stock of public capital on costs of production in the private sector is examined using annual data over the period 1958 89 a translog cost function is estimated and public capital is found to be a significant input the estimates indicate that public capital has positive marginal product and that private and public capital are complements in production rather than substitutes copyright 1992 by mit press

parallel imports price controls and innovation the impact of parallel trade on innovation in r d intensive industries such as pharmaceuticals is a hotly debated question in antitrust and ip policy the well known argument that parallel trade dampens innovation by undermining firms ability to price discriminate has been challenged by recent literature the argument is that with endogenous price controls parallel trade increases innovation by reducing governments incentives to set particularly low price caps in this paper we show that this result crucially depends on the degree of homogeneity of the trading countries the result only holds if consumers in poorer countries have a relatively similar demand for medication as consumers in richer countries instead when countries are relatively heterogeneous parallel trade dampens innovation and lowers welfare by exporting price cap regulation from poorer to richer countries these findings are in line with recent case evidence we also show that when patent length is endogenous richer countries will tend to choose longer patent protection with parallel trade whereas equilibrium price caps tend to be tighter in that case

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

retailers as agents and the limits of parallel trade abstract the volume of retail level parallel trade is surprisingly small despite persistent international price differences we offer an agency based explanation by considering competition between an original home manufacturer and a foreign retailer the model endogenizes the role of the retailer as an agent with private information on the perceived quality of the good in its own market the manufacturer cannot control the retailer once the latter has ordered its sales quantity but it can limit the initial offer if parallel trade is permitted this offer will fall if there is incomplete information resulting in a small or zero volume of parallel trade this outcome makes both the original producer and foreign consumers worse off while offering little benefit to home consumers compared to the case where such trade is banned

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

parallel imports and the pricing of pharmaceutical products evidence from the european union we consider policy issues regarding parallel imports pis of brand name pharmaceuticals in the european union where such trade is permitted we develop a simple model in which an original manufacturer competes in its home market with pi firms the model suggests that for small trade costs the original manufacturer will accommodate the import decisions of parallel traders and that the price in the home market falls as the volume of parallel imports rises using data from sweden we find that the prices of drugs subject to competition from parallel imports fell relative to other drugs over the period 1994 1999 econometric analysis finds that parallel imports significantly reduced manufacturing prices by 12 19 there is evidence that this effect increases with multiple pi entrants

an elementary proposition concerning parallel imports abstract this paper demonstrates that when countries individually choose whether or not to prohibit parallel imports a global nash equilibrium involves the permitting of parallel importing into all relevant foreign markets i e global uniform pricing this result is sensitive in a straightforward way to the tariff setting powers of countries and to the specification of a government s objective function i e political economy considerations we also show that when countries can prevent parallel exports then any nash equilibrium involves global price discrimination

the impact of quotas and tariffs on strategic r d behavior quotas and tariffs are compared in a two stage cournot duopoly game where r d is chosen initially and output is selected subsequently imposing a quota at or below the free trade import level results in either a pure strategy or a mixed strategy equilibrium compared to an equally restrictive tariff a quota leads to higher domestic profits but lower domestic output and r d in a pure strategy equilibrium furthermore a quota and a tariff may often produce opposite effects on domestic r d a quota set above the free trade import level may become binding and may lead to multiple equilibria copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

infrastructure investment a review essay economists try not to be faddists but they often cannot help themselves while work on a topic should mirror the prospective importance of the topic that situation seems to occur with disappointing frequency instead the usual pattern is that some reasonably important topic will be totally ignored for the longest time then recognized and then the subject of a flurry of work all out of proportion to its likely long run importance nowhere has this speculative bubble of economic research been more clearly illustrated than with infrastructure investment macroeconomists havelong felt that the stock of public capital is an important factor input in the production of total output macroeconomists have known that u s productivity growth slowed dramatically in about 1973 and macroeconomists should have known that united states investment in public capital has been down since the late 1960s yet analysis of the u s productivity slowdown completely ignored infrastructure investment for the first fifteen years of this slowdown concentrating instead on energy prices social regulation the composition of the work force research and development different rates of obsolescence of the private capital stock and any number of other matters the public capital stock was hardly ever even mentioned as a potential factor in the productivity slowdown aschauer changed all that he wrote a series of papers 1989a 1989b 1989c that put these two movements together econometrically infrastructure investment turned down and aggregate productivity turned down slightly later both in the united states and in some other developed countries his work hit the magic button those who had worried about the productivity puzzle for fifteen years welcomed a new suspect those who were worried about low rates of u s national saving welcomed a new way to make their argument even more forcefully than with official figures on saving and investment which do not count infrastructure investment as investment political liberals and liberal politicians saw a way to rescue government spending and projects from the assaults of reaganism and even a way to avoid oth

pharmaceutical innovation and parallel trade abstract this paper proposes a north south model to study the interaction between price regulation policies and parallel trade with a particular focus on the pharmaceutical sector we show that under parallel trade r d investment can rise only when the south government takes into full account its impact both on investment and on the firm s decision to supply the regulated country this arises because of a complete withdrawal from price regulation when policy choices are endogenized indeed the south wants to achieve this level of full commitment when it is large in size when instead it is smaller in size the south chooses an intermediate form of commitment whereby it anticipates its effect only on local distribution and delivery but not on global r d investment as a response to these credible levels of price control commitments the north reacts by allowing parallel imports from the south

strategic competition and optimal parallel import policy this paper shows that parallel import policy can act as an instrument of strategic trade policy we demonstrate this result in two country international duopoly where a domestic monopolist competes with a rival rm in the foreign market if it chooses to incur the xed investment cost of exporting the two rms sell horizontally dierentiated goods and compete in prices when the foreign market is signi cantly larger than the domestic one the home rm gains if it is unable to price discriminate its desire to not deviate too far from its optimal monopoly price in the domestic market makes it credibly less aggressive in price competition abroad which softens price competition and raises pro ts on the other hand when the foreign market is not signi cantly larger it is optimal for the home country to forbid parallel imports since international price discrimination yields higher pro ts to the home rm we draw out the implications of the two types of parallel import policies for global welfare

is all public capital created equal this paper uses a var approach to investigate the effects of public investment on private sector performance in the united states this approach is consistent with the argument that the analysis of

public capital and total factor productivity new evidence from the italian regions 1970 98 destefanis s and sena v 2005 public capital and total factor productivity new evidence from the italian regions 1970 98 regional studies 39 603 618 this paper analyses the relationship between industrial total factor productivity and public capital across the 20 italian administrative regions it adds upon the existing literature in a number of ways it analyses a longer period 1970 98 it allows for the role of human capital accumulation it tests for the existence of a long run relationship between total factor productivity and public capital through previously suggested panel techniques and for weak exogeneity of public capital and it assesses the significance of public capital within a non parametric set up based on the free disposal hull the results confirm that public capital has a significant impact on the evolution of total factor productivity particularly in the southern regions this impact is mainly ascribed to the core infrastructures road and airports harbours railroads w

gray market trade with product information service in global supply chains abstract this paper investigates the economic effects of a product information service when potential consumers who are segmented by their taste exist in gray markets specifically we construct an economic model that considers a multinational firm mnf who expands business to a country and chooses whether to provide information service regarding product characteristics if receiving the information consumers in a specific segment whose taste suits the characteristics have positive utility from consuming the product while those in other segments have no utility by contrast consumers in all segments have positive expected utility before consuming the product without information with these settings we demonstrate that there arises the equilibrium that the mnf provides no information service when gray market trade i e parallel trade is allowed in the country leading to lower consumer welfare than when it is prohibited a primary finding in the equilibrium is that such a situation arises especially when potential consumers are less segmented in this situation the regulator in the country should ban the parallel imports so as to enhance consumer welfare the result is counterintuitive and notable because one might intuitively infer that gray market trade is less desirable when customers are more minutely segmented and the product information service is thus more specific and necessary

the incentives for cost reduction in a differentiated industry abstract this paper investigates how the incentives for cost reduction in a differentiated industry depend upon the degree of product substitutability when goods are imperfect substitutes both cournot and bertrand competition result in underinvestment in the sense that a social planner would be willing to pay more for a given cost reduction than a profit maximizing firm overinvestment may occur when the goods are sufficiently close substitutes similarly cournot competition provides a stronger incentive to innovate than bertrand competition if the degree of substitutability is low and a weaker incentive if this degree is high

prioritizing towards a green export portfolio for india an environmental input output approach abstract proponents of free trade have often hailed international trade as an engine of economic growth however the foreign trade sector like many other sectors in developing countries frequently involves these countries walking a tightrope between their developmental objectives and environmental goals in this regard prioritizing for developing a green yet internationally competitive export portfolio provides a quintessential win win solution to the problem this study factors in both environmental benignity indicated by total co2 emission intensity as well as trade competitiveness indicated by revealed comparative advantage index in identifying the ideal indian export portfolio the analysis calculates the level of direct and indirect emissions from the foreign trade sector exports and imports using the environmental input output eio matrix for 2003 04 for india that has been jointly developed by researchers from keio university japan and the energy and resources institute teri new delhi the derived basket is compared to the current portfolio to estimate the potential saving from compositional changes and to suggest directions for policymaking to emphasize or de emphasize the export of certain categories of exports

parallel imports demand dispersion and international price discrimination parallel imports goods imported by unauthorized resellers are advocated worldwide for undermining international price discrimination for a continuum of markets we find that uniform pricing by a monopolist yields lower global welfare than third degree discrimination if demand dispersion across markets is large though uniform pricing avoids output misallocation too many markets go unserved mixed systems permitting discrimination across but not within designated groups of markets yield significantly higher welfare than uniform pricing or unrestricted multimarket discrimination and can pareto dominate uniform pricing thus while parallel imports might benefit some countries our results weaken the multilateral case for allowing them

differential pricing parallel trade and the incentive to invest abstract i consider the case for imposing uniform pricing on a monopolist in a setting where markets can be segmented according to differences in marginal costs and or consumer demand i also analyze the ex ante impact on incentives to invest in r d i show how two opposite trade offs arise when differential pricing is demand based uniform pricing has good ex post welfare properties but leads to lower investment ex ante conversely when differential pricing is cost based uniform pricing has bad ex post welfare properties but leads to higher investment ex ante

the impact of parallel imports on investments in cost reducing research and development abstract we develop a two country model of endogenous investment in process innovation by a manufacturer facing competition from parallel imports pi we find that the distortions associated with pi inhibit innovation however the difference between the manufacturer s expected profits under successful and failed innovation is u shaped in the cost of engaging in pi thus the reduction in r d investment depends on both legality of pi and transport costs the reduction in innovation could harm global welfare depending on whether the manufacturer was deterring pi with a high wholesale price if so banning such trade would raise expected welfare

parallel imports and repair services abstract this study explores the welfare effects of parallel imports when the producer may refuse to provide repair services for parallel imported units which reduces the degree of price convergence between countries if the probability of the product s breakdown is endogenously determined by the producer permitting parallel imports could increase the probability because a higher probability leads to a larger price gap as a result it is possible that prices increase and welfare deteriorates in both countries this negative welfare effect is more likely to emerge as the liberalization of trade in goods proceeds the prohibition of service discrimination recovers the positive welfare effect

public investment congestion and private capital accumulation this paper analyses the impact of public investment on the dynamics of private capital formation in an intertemporal optimising market clearing framework the key feature characterising the analysis is that the public good is treated as a durable capital good subject to congestion we show how in the presence of congestion the effect of government investment on private capital formation involves a tradeoff between the degree of substitution between private and public capital in production and the degree of congestion both lump sum and distortionary tax financing are considered with this tradeoff being tightened in the latter case

international differences in growth rates market globalization and economic areas part 1 human capital and growth how robust is the growth machinery nexus j b de long l h summers the role of human capital and political instability in economic development j benhabib m m spiegel allocation of time human capital and endogenous growth m baldassarri p de santis g moscarini part 2 explaining growth infrastructure and growth d canning m fay r perotti part 3 the importance of economic areas on the importance of joining the ec s single market the perspective efta members r e baldwin growth and specialization in an enlarged europe is a virtuous circle possible c a bollino p c padoan part 4 lessons from latin america latin america s economic growth v corbo p rojas inflation fall financial recovery and endogenous growth in latin american countries m bagella m lo cascio

commodity taxation and parallel imports we examine the interaction between commodity taxes and parallel imports in a two country model with imperfect competition while governments determine non cooperatively their commodity tax rate the volume of parallel imports is determined endogenously by the retailing sector we compare the positive and normative implications of having commodity taxes based on destination or origin principle we show that as the volume of parallel imports increases non cooperative origin taxes converge while destination taxes diverge moreover origin taxes are more similar and lead to higher aggregate welfare levels than destination taxes

parallel trade international exhaustion and intellectual property rights a welfare analysis this paper analyses the issue of parallel trade arbitrage for products protected by intellectual property rights many countries have traditionally allowed owners of intellectual property rights to prohibit arbitrage in the face of international price discrimination in a well known paper malueg and schwartz 1994 showed that this policy decreases social welfare when the same markets are served in both regimes with and without arbitrage their model considered only the setting of prices and not investment in product development we consider a two stage game where firms choose quality first and then prices since the threat of arbitrage ex post reduces the incentive to invest ex ante the net benefits of parallel trade may vanish we also show that the size of the welfare effects is significantly affected by the presence of a generic product which represents a form of competition for the monopolist the monopolist will introduce a fighting brand to compete with the generic which dilutes but does not eliminate the result on the adverse effects of parallel trade on investments

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

efficiency and technical progress sources of convergence in the spanish regions the paper analyses the contribution of efficiency as a mechanism of labour productivity convergence taking as the unit of analysis the spanish regions in the period 1964 1993 using the stochastic frontier approach a translogarithmic production function is estimated for the different sectors of the spanish regional economy demonstrating on this basis the existence of substantial differences in efficiency between sectors as well as between regions with regard to convergence the results obtained indicate that at aggregate level the convergence observed in labour productivity is explained by the faster growth of the capital labour ratio of the initially poorer regions and the contribution of technical change and the efficiency hence by the convergence of tfp however the information by sectors shows different results thus on the one hand the importance of the convergence in production per employee is seen in all sectors except agriculture and on the other it is observed that technical change is a

parallel trade product quality and welfare we study the welfare effects of parallel trade pt considering investment in quality we thus revisit the case for pt in research intensive industries we find that pt may raise quality depending on how preferences for quality differ across countries conditional on quality consumer surplus may rise fall in the pt source pt recipient country while pt reduces ex post welfare improving quality is a necessary condition for pt to increase welfare ex ante