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

intervention analysis of electoral tax cycle the case of japan this paper analyzed the impact of elections on tax policy in japan using an arima autoregressive integrated moving average intervention analysis from 1953 through 1992 we used discretionary tax revenues which means the changes in tax receipts attributable to changes in the tax code rather than automatic tax revenues due to business cycles in the economy

the effects of flexible specialization on industrial politics and the labor market the motion picture industry the authors citing historical and statistical evidence spanning three decades examine how the transition to flexibly specialized production organization in the motion picture industry has changed the distribution of work and wages and the definition of skills one important result of that process has been the emergence of a new form of intra occupational labor market segmentation based much less on differences in hourly wage rates than on differential access to hours of work also the reorganization of the production process has altered the relative bargaining power of employers and workers and of different groups within the industry work force resulting in increased conflict among segments of the work force and a strengthening of employers bargaining power vis a vis industry unions

pharmaceutical cost sharing systems and savings for healthcare systems from parallel trade this paper studies the consequences of parallel trade in a two country model it compares a coinsurance scheme consumers pay a percentage of the drug price and an indemnity insurance scheme reimbursement is independent of the drug price with respect to changes in copayments and public health expenditure in the destination country copayments for patients decrease to a larger extent under indemnity insurance whereas reductions in public health expenditure occur only under coinsurance in the source country copayments increase less under coinsurance whereas health expenditure is reduced more under indemnity insurance in both countries total expenditure under parallel trade is lower

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

cartoon planet worlds of production and global production networks in the animation industry as more animated films are produced new worlds of production have emerged the animation production system is distinct from film production relying on different technologies and labor skills its globalization therefore has taken place differently although both are structured by the global production networks of the media conglomerates we present a framework for understanding the animation industry its international division of labor and its diverse markets enabled by pools of artistic labor growing demand and the diffusion of production skills copyright 2010 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

business political power the case of taxation we examine contending views about the forms and mechanisms of business power in u s politics by estimating time series models explaining taxation and redistribution taxation and redistribution constitute strong cases for theories about business and class power since all firms have an interest in reducing taxation we find that changes in corporate taxation and in redistribution between capital gains income and earned income and between corporate taxation and individual taxation are strongly influenced by political partisanship with democratic administrations increasing the tax burden on firms and their owners how far corporations engage in electoral financing measured through the establishment of corporate political action committees is also influential the models show some evidence consistent with the understanding of class power conceptualized by bowles gordon and weisskopf and the presence of election cycle effects but inconsistent with implications arising from the structural dependence of the state on capital and asset concentration in the largest corporations as a mechanism of class power

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

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

an empirical test of hypercongestion in highway bottlenecks abstract there is a widely held view that as demand for travel goes up this decreases not only speed but also the capacity of the road system a phenomenon known as hypercongestion we revisit this idea in the context of highway bottlenecks we propose an empirical test using an event study design to measure changes in highway capacity at the onset of queue formation we apply this test to three highway bottlenecks in california for which detailed data on traffic flows and vehicles speeds are available we find no evidence of a reduction in highway capacity at any of the three sites during periods of high demand across sites and specifications we have sufficient statistical power to rule out even small reductions in highway capacity this lack of evidence of hypercongestion stands in sharp contrast to most previous studies and informs core models in urban and transportation economics

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

corporate economic power and the state a longitudinal assessment of two explanations much has been written about the relationship between the economic resources of corporations and their ability to control politics in advanced capitalist democracies the resource that has received the most attention is economic concentration but there is little agreement about the precise form of concentration that matters in an attempt to find the most useful image of the state this study looks at the connection between the aggregate concentration of assets among the leading manufacturing firms as well as the rate of business investment and taxes on business time series regressions computed on u s national level data show that theories of the state that emphasize the independet activities of private investors are not supported instead the aggrgate concentration of assets as measured by the share of assets held by the leading 100 firms has a strong negative influence on effective corporate tax rates these results are consistent with the theory that heightened aggregate concentration helps corpor

power in firm networks what it means for regional innovation systems christopherson s clark j 2007 power in firm networks what it means for regional innovation systems regional studies 41 1223 1236 the role of power within regional firm networks is noted in empirical studies but insufficiently theorized it is suggested that network functioning is conflictual and that more powerful network members particularly transnational corporations tncs leverage regional resources to advance their sustainable competitive advantage the agendas and power exercised by tncs within regionalized firm networks have significant implications for regional policy and the uneven allocation of resources and capacities within and among regions the findings indicate that transnational firm access to resources that are critical to innovation including university research and skilled labour negatively affects the potential for innovation by small and medium size firms christopherson s et clark j 2007 le pouvoir au sein des reseaux d entreprise son importance pour les systemes d

employers and the welfare state the political economic organization of firms and social policy in contemporary capitalist democracies the authors argue that the organization of employers shapes social policy support among firms and in turn affects social policy outcomes specifically the authors argue that the centralization and cohesion of employer groups and economic cooperation across enterprises positively affects social welfare provision empirically the authors assess the impacts of business organization on social welfare effort in 15 developed democracies between the 1970s and 1990s the authors also provide analysis of the impact of employer organization on active labor market policy the authors find that the organization of employers is one of the most important determinants of overall social welfare effort the authors also find that employer organization affects the development of active labor market policies and it influences the degree to which social democratic parties pursue active labor market programs the authors conclude with a discussion of the findings implications for theories of social corporatism and the w

macroeconomics economic stratification and partisanship a longitudinal analysis of contingent shifts in political identification this study examines the effects of unemployment and inflation on aggregate party identification since 1953 distributive explanations emphasizing partisan preferences about macroeconomic outcomes and their effects on different income groups are gauged by letting the explanatory variables have dissimilar effects when different parties hold office independents are included so multinominal logit can be used to trace movements between all three identification choices when a democrat is president increased unemployment heightens democratic identification but inflation has no effects when a republican is president increased unemployment and inflation reduce republican identification these results reveal historically contingent relationships between macroeconomic outcomes and partisan coalitions

pharmaceuticals and the developing world pharmaceuticals have greatly improved health in developing countries but many people in developing countries do not obtain even inexpensive pharmaceuticals and little pharmaceutical r d is oriented toward products needed by developing countries such as a malaria vaccine access to existing products could be improved by facilitating differential pricing for example by subsidizing donation programs and reforming health care delivery r d incentives could be improved if rich countries or international organization committed to purchase needed products when they are developed and make them available to the poor

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

elections keynes bureaucracy and class explaining u s budget deficits 1961 1978 the determination of u s federal budget deficits and surpluses during a period of keynesian fiscal activism is modeled in light of relevant social science literatures rational choice emphases upon electoral manipulation of the economy and keynesian stabilization marxian emphases upon monopolization andfiscal control of labor militancy organizational decision theory emphases upon budgeting inertia and a number of additional thrusts from other literatures are supported by time series regression analyses of 1961 1978 surpluses deficits the final model is statistically well behaved analysis of so called high employment measures of discretionary surpluses deficits supports all interpretations requiring discretionary policy making but an indication of automatic stabilization emerges as well a focus upon executive policy making roles is suggested as one means to further theoretical integration of explanations of state macroeconomic policy

cross national price differences for pharmaceuticals how large and why bilateral drug price and quantity indexes based on comprehensive data for seven countries us canada france germany italy japan and the uk refute the conventional wisdom that us drug prices are much higher than elsewhere for laspeyres us weighted indexes previous drug price comparisons are biased by unrepresentative samples and unweighted indexes quasi hedonic regression shows that cross national price differences reflect differences in product characteristics and in their implicit prices which reflect the regulatory regime strict price regulation systematically lowers prices for older molecules and globally diffused molecules generic competition lowers prices in less regulated regimes which also have more price elastic demand

coordinating on lower prices pharmaceutical pricing under political pressure we investigate the effects of political activity on pharmaceutical prices focusing on the health care reform period in the early 1990s we characterize firms based on their vulnerability to future price regulation and find that the more vulnerable firms were more likely to take various actions to forestall regulation most notably coordinating on a specific percentage price increase during 1993 since moderating price increases could have averted regulation the coordination appears to be the industry s response to a collective action problem

gaining access by doing good the effect of sociopolitical reputation on firm participation in public policy making this paper examines the role of firms sociopolitical reputations as proxied by their perceived engagement in socially responsible practices in public policy makers decisions to grant access in the policy making process i argue that policy makers dependencies motivations and decision making processes lead them to evaluate firms by using sociopolitical reputation as a differentiating heuristic i hypothesize that firms that construct stronger sociopolitical reputations will be granted greater access and that firms existing political activity and policy makers partisanship will moderate this relationship i test these hypotheses using an 11 year panel on congressional testimony reputation and political and financial characteristics for the s p 500 and find support for all three these findings support the existence of a sociopolitical dimension to firms reputations that affects how public policy makers evaluate firms demonstrating that corporate social responsibility pays political benefits this paper was accepted by jesper sorensen organizations

international aspects of merger policy a survey this paper surveys the literature on merger policy in open economies we first adopt a reduced form approach to derive general insights on the scope for conflict between national antitrust authorities and on the gains from international merger policy coordination taking trade costs as given we use standard oligopoly models to derive conditions on market structure under which underenforcement or overenforcement of national merger policies can arise we then study the interactions between merger policy and trade policy and find that trade liberalization often leads to stricter national merger policies we conclude by discussing empirical evidence on conflict between antitrust authorities

price regulation and parallel imports of pharmaceuticals abstract this paper studies the effects of price regulation and parallel imports in the on patent pharmaceutical market in a theory model where the producer price is subject to bargaining between the brand name producer and a distributor we show that the effects of stricter price regulation crucially depend on whether the producer faces competition from parallel imports while parallel imports improve the bargaining position of the distributor price regulation counteracts this effect and may even be profitable for the producer we test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over 4 years 2004 2007 we show that stricter price regulation reduces competition from parallel imports and has no strictly negative effect on producer profits in the presence absence of parallel imports our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports

is american health care uniquely inefficient evidence from prescription drugs abstract alan garber and jonathan skinner 2008 famously conjectured that the us health care system was uniquely inefficient relative to other countries we test this idea using cross country data on prescription drug sales newly linked with an arguably objective measure of relative therapeutic benefits or drug quality specifically we investigate how higher and lower quality drugs diffuse in the us relative to australia canada switzerland and the uk our tabulations suggest that lower quality drugs diffuse more in the us relative to high quality drugs compared to each of our four comparison countries consistent with garber and skinner s conjecture

does the organization of capital matter employers and active labor market policy at the national and firm levels does the organization of business matter for social policy development in the advanced capitalist democracies conventional welfare state analysis has given this significant question scant attention we argue however that the representational power of business coordination across business interest units and integration of associations in corporatist policy making forums or what we call the social corporatist organization of business should result in greater support and participation by employers in social policy formation and implementation we test our arguments with models both of 1980 98 pooled time series data on withinand across country variation in spending on active labor market programs and of extensive firm level survey data from denmark and the united kingdom we find that the centralization and coordination of employers as well as the integration of employer organizations in corporatist policy making forums are strongly associated with shares of national income devoted to active labor market policy we find moreover that the degree of employer organization conditions active labor market policy responses to de industrialization and increases in general unemployment at the firm level membership in an employer association has a significant positive effect on employer participation in active labor market programs in corporatist denmark but not in the pluralist united kingdom

static and dynamic effects of health policy evidence from the vaccine industry public policies designed to increase utilization of existing technologies may also affect incentives to develop new technologies this paper investigates this phenomenon by examining policies designed to increase usage of preexisting vaccines i find that these policies were associated with a 2 5 fold increase in clinical trials for new vaccines for several diseases the induced innovation is socially wasteful though small in magnitude in one case however the dynamic social welfare benefits from induced innovation exceed the policies static benefits from increasing vaccination with existing technology these findings underscore the importance of including technological progress in economic analysis of public policy

anti foreign bias in the court welfare explanation and evidence from canadian intellectual property litigations abstract are judges concerned in the same way as policy makers with the effects of their decisions on national welfare in this paper we analyze this question by examining the outcomes of intellectual property rights ipr litigations between domestic and foreign firms we use a simple model of oligopoly in which ipr takes the form of a more efficient production technology to illustrate how antiforeign bias varies across cases when judges have welfare concerns the predictions of the model are tested using data on all canadian ipr cases over a four year period we find that foreign firms have about 25 percentage points lower probability of protecting their ipr in canadian courts relative to domestic firms we also find that courts decisions are aligned with national welfare maximization principles so that foreign firms are less likely to win in those cases when the implied welfare gains from not protecting foreign ipr are greater these findings are robust to controlling for endogenous selection of firms into litigation

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

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

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

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

demand fluctuations in the ready mix concrete industry i investigate the role of demand shocks in the ready mix concrete industry using census data on more than 15 000 plants i estimate a model of investment and entry in oligopolistic markets these estimates are used to simulate the effect of eliminating short term local demand changes a policy of smoothing the volatility of demand has a market expansion effect the model predicts a 39 increase in the number of plants in the industry since bigger markets have both more plants and larger plants a demand smoothing fiscal policy would increase the share of large plants by 20 finally the policy of smoothing demand reduces entry and exit by 25 but has no effect on the rate at which firms change their size

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

do firms underinvest in long term research evidence from cancer clinical trials we investigate whether private research investments are distorted away from long term projects our theoretical model highlights two potential sources of this distortion short termism and the fixed patent term our empirical context is cancer research where clinical trials and hence project durations are shorter for late stage cancer treatments relative to early stage treatments or cancer prevention using newly constructed data we document several sources of evidence that together show private research investments are distorted away from long term projects the value of life years at stake appears large we analyze three potential policy responses surrogate non mortality clinical trial endpoints targeted r d subsidies and patent design jel d92 g31 i11 l65 o31 o34

obtaining a driver s license in india an experimental approach to studying corruption we conduct two experiments to understand the process of obtaining a driver s license in india in the first experiment we randomly assign license candidates to one of three groups bonus offered a financial reward if they could obtain their license fast lesson offered free driving lessons upfront and control the control group alone illustrates bureaucratic failures 71 of the license getters in that group avoided the mandated driving test and 62 failed a surprise driving test the system responds to private needs there are more license getters in the bonus group but at a social cost there are more license getters who cannot drive in the bonus group the system however also appears to respond to social considerations as there are more license getters in the lesson group large extra legal payments are made by license getters those in the control group pay 2 5 times the official fee more of these extra legal payments take place in the bonus group surprisingly these extra legal payments are not direct bribes to bureaucrats but instead payments to agents in the second experiment we perform an audit study to better understand the role of agents the audit shows that agents can provide licenses to individuals even if they cannot drive but the audit also shows that agents cannot as easily circumvent all other rules we argue that our findings are most consistent with agents being the channel for corruption in this system we also report some suggestive evidence that bureaucrats create red tape possibly to induce more license candidates to use agents

strategic interaction among governments in the provision of a global public good abstract how do governments respond to other governments when providing a global public good using data from 2007 to 2014 on medical research funding for infectious and parasitic diseases we examine how governments and foundations in 41 countries respond to funding changes by the us government which accounts for half of funding for these diseases because funding across governments might be positively correlated due to unobserved drivers they have in common we use variation in the representation of research intensive universities on us congressional appropriations committees as an instrument for us funding we find that a 10 increase in us government funding for a disease is associated with a 2 to 3 reduction in funding for that disease by another government in the following year

patents and the global diffusion of new drugs analysis of the timing of launches of 642 new drugs in 76 countries during 1983 2002 shows that patent and price regulation regimes strongly affect how quickly new drugs become commercially available in different countries price regulation delays launch while longer and more extensive patent rights accelerate it health policy institutions and economic and demographic factors that make markets more profitable also speed up diffusion the estimated effects are generally robust to controlling for endogeneity of policy regimes with country fixed effects and instrumental variables the results highlight the important role of policy choices in driving the diffusion of new innovations

regulation and pricing of pharmaceuticals reference pricing or price cap regulation we study the relationship between regulatory regimes and pharmaceutical firms pricing strategies using a unique policy experiment from norway which in 2003 introduced a reference price rp system called index pricing for a sub sample of off patent pharmaceuticals replacing the existing price cap pc regulation we estimate the effect of the reform using a product level panel dataset covering the drugs exposed to rp and a large number of drugs still under pc regulation in the time before and after the policy change our results show that rp significantly reduced both brand name and generic prices within the reference group with the effect being stronger for brand names we also identify a negative cross price effect on therapeutic substitutes not included in the rp system in terms of policy implications the results suggest that rp is more effective than pc regulation in lowering drug prices while the cross price effect raises a concern about patent protection

do national patent laws stimulate domestic innovation in a global patenting environment a cross country analysis of pharmaceutical patent protection 1978 2002 this paper evaluates the effects of patent protection on phar maceutical innovations for 26 countries that established pharmaceutical patent laws during 1978 2002 controlling for country characteristics through matched sampling techniques to establish two proper comparison sets among 92 sampled countries and through country pair fixed effects regressions this study yields robust results national patent protection alone does not stimulate domestic innovation as estimated by changes in citation weighted u s patent awards domestic r d and pharmaceutical industry exports however domestic innovation accelerates in countries with higher levels of economic development educational attainment and economic freedom additionally there appears to be an optimal level of intellectual property rights regulation above which further enhancement reduces innovative activities

how do patent laws influence innovation evidence from nineteenth century world fairs studies of innovation have focused on the effects of patent laws on the number of innovations but have ignored effects on the direction of technological change this paper introduces a new dataset of close to fifteen thousand innovations at the crystal palace world s fair in 1851 and at the centennial exhibition in 1876 to examine the effects of patent laws on the direction of innovation the paper tests the following argument if innovative activity is motivated by expected profits and if the effectiveness of patent protection varies across industries then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective analyses of exhibition data for 12 countries in 1851 and 10 countries in 1876 indicate that inventors in countries without patent laws focused on a small set of industries where patents were less important while innovation in countries with patent laws appears to be much more diversified these findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries jel d2 k11 l51 no 014

tax rates and tax evasion evidence from missing imports in china tax evasion by its very nature is difficult to observe we quantify the effects of tax rates on tax evasion by examining the relationship in china between the tariff schedule and the evasion gap which we define as the difference between hong kong s reported exports to china at the product level and china s reported imports from hong kong our results imply that a one percentage point increase in the tax rate is associated with a 3 percent increase in evasion furthermore the evasion gap is negatively correlated with tax rates on closely related products suggesting that evasion takes place partly through misclassification of imports from higher taxed categories to lower taxed ones in addition to underreporting the value of imports

arbitrage across borders why itunes gift cards sell above face value on ebay i introduction firms that operate internationally often charge different prices for the same product in different countries these price differences may be due to cost differences exchange rate fluctuations and or price discrimination where firms set prices based on consumers willingness to pay for the product there is an extensive literature on international price differences but nearly all of this research has focused on physical goods where arbitrage the situation where someone buys the product from a low price country and resells it to someone in a high price country tends to be relatively costly because of transaction costs including search costs and transportation costs there have been no empirical papers in the economics literature thus far on the arbitrage of downloadable goods this paper looks at the case of itunes which sells downloadable music videos books ipad and iphone applications and other content worldwide and shows how the sale of itunes gift cards above face value on the auction website ebay is linked to the arbitrage of itunes products itunes which is operated by apple first started selling music downloads in 2003 and by 2008 it was the largest music retailer in the united states and the world 1 people typically purchase products from their own country specific itunes stores but not all content is available in all countries due in part to licensing restrictions and consumer preferences e g itunes does not sell music movies and tv shows in many countries prices also vary across countries as detailed in section iii of this paper one can easily switch to any other country s itunes store with just a few mouse clicks in particular the u s store would seem to be a natural focal point and it tends to have lower prices and a wider selection however in order to actually purchase something from the u s store one needs to have either a u s credit card or a u s itunes gift card available in denominations ranging from 10 to 100 in the primary market through apple and its authorized sellers such as wal mart and best buy as such it can be surmised that some individuals outside the united states may be willing to purchase itunes gift cards on ebay in order to gain access to the u s store it should be noted that itunes terms and conditions specify that the u s store s products are available only to buyers in the united states we can see the evidence for this through the sale of itunes gift cards on ebay nearly 200 itunes gift cards are sold daily on ebay about 10 of all gift cards and more than half of these itunes gift cards sell above face value a phenomenon that is unusual among gift cards after discussing some background information and related literature this paper examines more than 1 300 ebay transactions in february 2011 and finds that itunes gift cards targeted to international buyers which are often sent electronically are more likely to have higher prices controlling for seller reputation shipping charges and other variables this indicates that non u s buyers are willing to pay a premium for the gift cards because they are unable to obtain them otherwise information about the buyers countries allows us to see whether it is the u s store s greater product availability or its lower prices that buyers are interested in this paper addresses an important issue because of the rising popularity of the sales of downloadable content worldwide this market includes music videos books video games and applications the internet has also made it easier for buyers and sellers in different countries to find one another and in the case of digital products exchange goods if arbitrage is widespread firms may decide to either minimize price differences between countries stop selling in low price countries altogether or use the legal system or other methods to prevent arbitrage in terms of the big picture this issue has implications for social welfare copyright enforcement and international trade policies and governments in some countries may also be concerned if their citizens have access to goods that are banned

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

pricing patent loss and the market for pharmaceuticals dustry the drug price competition and patent term restoration act of 1984 very clearly reflects the determination of policy makers to simultaneously address issues of price control and technical progress the 1984 act increased returns to innovation by extending the period of patent protection to take into account the time between receipt of a patent and food and drug administration fda approval of a drug for sale in the market the 1984 act also reduced the testing requirements for approval of new generic brands of existing chemical entities thus reducing entry barriers in markets where patents have expired the expected outcome from eased entry conditions for generic substitutes was substantially enhanced price competition and lower prices for brand name drugs in fact prices for brand name drugs have tended to increase following entry by generics wagner and duffy 28 examined price changes for top selling generics and name brands they show substantial price increases in brand name prices accompanying large reductions in generic prices as entry of generics occurs grabowski and vernon 9 examined data on 18 major orally administered rug products subject to generic competition between 1983 and 1987 and found that the name brand price increased by an average of 7 one year subsequent to generic entry and 11 two years following generic entry

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

part time work and the hiring of older workers this research uses german establishment data to examine the relationship between back loading compensation the hiring of older workers and their part time status we confirm that establishments that defer compensation are less likely to hire older workers we demonstrate for the first time that establishments that defer compensation are more likely to limit older workers to part time jobs when they do hire them thus deferred compensation plays a larger role in reducing the chances of older workers being hired into full time jobs than would be inferred from past estimates simply examining their odds of being hired at all

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

internal labor markets contrary to the popular image of change and turnover most americans spend the majority of their working lives employed in a single firm the original essays in this book discuss the origins and importance of these internal labor markets providing new insights into their changing power and influence they also explore the more varied and dynamic employment practices that have evolved in large companies in response to new government regulations increased competition for managerial talent the difficult economy of the 1970s and to the threat of unions contents introduction the nature and importance of internal labor markets paul osterman the development of internal labor markets in american manufacturing firms sanford m jacoby the making and shaping of job and pay structures in the iron and steel industry bernard elbaum variations in managerial career structures in high technology firms the impact of organizational characteristics on internal labor markets rosabeth moss kanter the transformation of the industrial relations and personnel function thomas a kochan and peter cappelli white collar internal labor markets paul osterman job training employment practices and the large enterprise the case of costly transferable skills paul ryan the search for a societal effect in the production of company hierarchy a comparison of france and germany marc maurice francois sellier and jean jacques silvestre internal labor markets and paternalism in rural areas peter b doeringer

the medium term impact of medicare part d on pharmaceutical prices medicare part d began coverage of prescription drugs in 2006 using data from the first year of the program we found that part d reduced pharmaceutical prices for medicare recipients with these effects driven by enrollees previously without drug coverage in this paper we extend our analysis through 2009 the fourth year of the program to investigate whether plans continued to extract price concessions in return for favorable formulary placement or if consumer inertia or other factors caused prices to bounce back after their initial decline we find price declines persisted through at least the third year of the program

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

parallel trade and pharmaceutical prices a game theoretic approach and empirical evidence from the european union this paper studies whether parallel traded products spark price competition in pharmaceutical markets and whether they are any cheaper than locally sourced products we follow a game theoretic approach and employ descriptive statistics and econometric methods to study the effects of parallel trade on competition from a theoretic and empirical perspective the theoretic approach suggests that there is a unique nash equilibrium and the parallel trader sets prices at the same level as the locally sourced product while the price of the latter remains unaffected by parallel trade however there may be deviations from this equilibrium in the presence of particular policies or generic competition in which case the parallel traded product may be priced at lower levels than the locally sourced product empirical analysis confirms the predictions of the theory descriptive statistics show that there is no gap between locally sourced and parallel traded products unless generics or policies encouraging parallel trade are present results of the econometric analysis show that parallel trade does not trigger price competition and that the price of the locally sourced product remains unaffected by parallel trade therefore any savings for health insurance occurring as a result of parallel trade are limited

state timing of policy adoption workmen s compensation in the united states 1909 1929 using event history analysis this study of workmen s compensation analyzes how fast american state legislators responded to the work accident problem states were quicker to adopt legislation when productivity and work accident litigation were high and when nonagricultural workers outnumbered agricultural ones despite the influence of capital and labor in shaping workmen s compensation in other analyses the speed of state legislation was unaffected by the presence or interests of capital and labor groups this suggests that the speed of adoption was shaped by a different aspect of capital labor relations than is seen when studies focus on the activities of specific actors or groups

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

flexible production and the transformation of industrial relations in the motion picture and television industry the authors trace the development of the motion picture and television production industry s three tier compensation scheme showing how incremental solutions to unanticipated problems broadly transformed labor relations by changing key institutional relationships this example they argue demonstrates that a fundamental transformation in the unionemployer relationship need not originate in high level strategic planning and may represent hope for the survival of collective bargaining in other industries

how do incumbents respond to the threat of entry evidence from the major airlines this paper examines how incumbents respond to the threat of entry of competitors as distinguished from their response to competitors actual entry it uses a case study from the passenger airline industry specifically the evolution of southwest airlines route network to identify particular routes where the probability of future entry rises abruptly when southwest begins operating in airports on both sides of a route but not the route itself this dramatically raises the chance they will start flying that route in the near future we examine the pricing of the incumbents on threatened routes in the period surrounding such events we find that incumbents cut fares significantly when threatened by southwest s entry into their routes this is true even after controlling in several ways for airport specific operating costs the response of incumbents seems to be limited only to the threatened route itself and not to routes out of nearby competitor airports where southwest does not operate e g fares drop on routes from chicago midway but not chicago o hare the largest responses appear to be restricted to routes that were concentrated beforehand incumbents do experience short run increases in their passenger loads concurrent with these fare cuts this is consistent with theories implying incumbents will try to generate some longer term loyalty among current customers before the entry of a new competitor we examine evidence relating this demand building motive to frequent flyer programs and find suggestive evidence in favor of this notion there is only weak evidence that incumbents increase capacity on the routes

should the us allow prescription drug reimports from canada as a result of public outrage over lower prescription drug prices in canada congress passed legislation that would allow these drugs to be imported into the us the lower canadian prices reflect price regulation opponents of allowing these imports have argued that the us will import canadian price controls and that profits of pharmaceutical companies will be hurt in this paper a model is developed in which a good sold in the foreign country is subject to a negotiated price which is determined in a nash bargaining game when imports back into the home country are allowed this negotiated price also becomes the domestic price this causes the home firm to make fewer price concession in the nash bargaining game home firm profits are found to rise under the reimport regime for both of the demand functions analyzed in this paper

vertical distribution parallel trade and price divergence in integrated markets we develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets that are integrated at the distributor level by parallel imports pi the manufacturing rm needs to set these two prices to balance three competing interests restricting competition in the pi recipient market avoiding resource wastes due to actual trade and reducing the double markup problem in the pi source nation

does regulation drive out competition in pharmaceutical markets abstract most countries regulate pharmaceutical prices either directly or indirectly on the assumption that competition is at best weak in this industry this paper tests the hypothesis that regulation of manufacturer prices and retail pharmacy margins undermines price competition we use data from seven countries for 1992 to examine price competition between generic competitors different manufacturers of the same compound and therapeutic substitutes similar compounds under different regulatory regimes we find that price competition between generic competitors is significant in unregulated or less regulated markets united states united kingdom canada and germany but that regulation undermines generic competition in strict regulatory systems france italy and japan regulation of retail pharmacy further constrains competition in france germany and italy regulation thus undermines the potential for significant savings on off patent drugs which account for a large and growing share of drug

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

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

compulsory licensing and patent protection a north south perspective in a stylized model involving a developing country called south and a foreign patent holder we analyze whether and how the incidence and social value of compulsory licensing cl depends upon the south s patent protection policy if south is free to deny patent protection cl fails to arise in equilibrium and the option to use it makes both parties worse off if south is obligated to offer patent protection cl can occur and even yield a pareto improvement the ability to control price increases the south s incentive for patent protection as well as the likelihood of cl this article is protected by copyright all rights reserved

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

politics and the structural dependence of the state in democratic capitalist nations i explore empirically a central claim of the structural dependence thesis namely that capitalists ability to disinvest fundamentally conditions policy choices in democratic capitalist systems utilizing time series data for 16 affluent democracies from 1965 to 1984 i find that indeed low rates of business investment are associated with reductions in corporate tax burdens and that these reductions are more pronounced in periods of economic crisis moreover low rates of capital formation engender cuts in personal income taxes during periods of economic stress however i also find that the magnitude of responsiveness of taxation to low rates of investment is relatively small and that analyses of the political context of investment and taxation indicate that governments have choices the responsiveness of corporate tax burdens to capital formation may under some governments be part of a policy mix designed to maintain adequate investment and to address the demands of core constituencies

labour market segmentation and workers careers the case of the italian knitwear industry this paper reports on empirical research into the labour market in the knitwear and ready to wear industry in the province of jvjodena emilia in particular it looks at the careers of three categories of workers homeworkers those employed on the production lines of larger firms and artisans 1 italy in common with many other industrialised capitalist countries has witnessed a growing decentralisation of production this tendency has been differently interpreted but a consensus is emerging that such developments are not evidence of economic backward ness 2 on the contrary an industrial structure consisting of firms of different size but with a large number of small and even microscopic enterprises is increasingly being recog nised as one possible avenue of economic development taking this for granted the aim of these notes is to investigate the structure of the labour market in a prosperous area typified by economic growth which has the small firm as its base element

productivity dispersion in medicine and manufacturing abstract the conventional wisdom in health economics is that large differences in average productivity across us hospitals are the result of idiosyncratic features of the healthcare sector which dull the role of market forces strikingly however we find that productivity dispersion in heart attack treatment across hospitals is if anything smaller than in narrowly defined manufacturing industries such as ready mixed concrete while this fact admits multiple interpretations it suggests that healthcare may have more in common with traditional sectors than is often assumed and relatedly that insights from research on productivity and allocation in other sectors may enrich analysis of healthcare

the market impacts of pharmaceutical product patents in developing countries evidence from india in 2005 as the result of a world trade organization mandate india implemented a patent reform for pharmaceuticals that was intended to comply with the 1995 trade related aspects of intellectual property rights trips exploiting variation in the timing of patent decisions we estimate that a molecule receiving a patent experienced an average price increase of just 3 6 percent with larger increases for more recently developed molecules and for those produced by justone firm when the patent system began our results also show little impact on quantities sold or on the number of pharmaceutical firms operating in the market

does regulation drive international research cooperation evidence from the pharmaceutical sector to what extent is an increased stringency of the intellectual property rights ipr system apt to stimulate research cooperation between developed and emerging economies to address this question we empirically investigate how international joint research projects in the pharmaceutical sector are affected by the regime of ipr in force in the two countries involved in the collaboration looking at the joint signature of both patent documents and scientific articles by researchers located in developed and emerging markets our investigation indicates two opposite effects joint publications are fostered by stricter ipr rules whereas joint patents are discouraged a recently proposed theory provides a plausible rationale for this apparently contradicting result

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

do patents work thickets trolls and antibiotic resistance this paper connects ideas from recent literature on the economics of intellectual property ip to address the question did the strengthening and broadening of ip rights from important patent policy changes in the us promote greater innovation the analysis rests on the theory of cumulative innovation which shows that if ip rights on a pioneer invention extend to follow on research and impediments to contracting exist then strengthening patents can actually reduce overall innovation recent empirical studies are consistent with the theory patents can significantly deter follow on research in complex technology areas where contracting is difficult computers electronics telecommunications but not in drugs chemicals and human genes i outline remedies from court decisions and antitrust policy for addressing inefficiencies from patent trolling patent thickets and the anti commons of fragmented ownership i then apply the analysis to the antibiotics market drawing on recent research to examine how patent and competition policies can be used to improve incentives for drug development in the battle against antibiotic resistance the literature provides persuasive evidence that the policy changes overreached in broadening and strengthening ip rights and reveals important patent reforms for improving the effectiveness of patent systems in the us and canada

dynamic competition and intellectual property rights in a model of product development we study innovation timing and socially optimal intellectual property rights iprs when firms facing market uncertainty invest strategically in product development if demand growth and volatility are high attrition occurs and iprs should ensure the cost of imitation attains a lower bound we identify if demand growth and volatility are low then provided that the private imitation incentive is socially excessive iprs should set the cost of imitation high enough to induce preemption and possibly winner take all preemption moreover the welfare achieved with optimal iprs is then greater with endogenous innovation than if firm roles are predetermined illustrating the importance of fostering dynamic competition in extensions we show how firms benefit from open standards takeovers have ambiguous welfare effects and simple licensing schemes are welfare improving

different trajectories in the social divisions of labour the cutlery industry in sheffield england and tsubame japan to contribute to the growing debate on the social division of labour and its implications for local development this paper comparatively analyses recent trends in the industrial organisation of the cutlery industry in sheffield and tsubame both industries evolved as flexibly specialised export oriented production systems based on a highly interdependent network of small firms in the past 20 years however the social division of labour underlying sheffield s cutlery industry has been much reduced in size and complexity while tsubame has retained and used its social division of labour to adjust towards more value added production the different trajectories of the two systems reflect different approaches to competitiveness in tsubame the emphasis is on innovation while in sheffield the industry has been extremely conservative placing emphasis on minimising costs

the role of firm characteristics in pharmaceutical product launches this paper examines the determinants of new pharmaceutical launches since 1980 in the g7 nations using discrete time hazard models despite the obvious incentive to amortize the large sunk costs of drug development over many markets entry occurs in only 4 of the opportunities the results indicate that firm characteristics such as domestic status and experience in the local market are important in explaining product launches in addition to market characteristics also the interaction between the innovating firm and target country is a critical component of profitability new drugs are 1 5 times more likely to be launched in markets that share a border or a language of a drug company s country of headquarters even for multinational firms the effect of competition depends on the characteristics of both the potential entrant and the incumbents domestic entrants prefer to compete with domestic incumbents although this is an industry with the potential for ubiquitous licensing and low transportation costs the specific match quality between the innovating firm and market conditions remains an important determinant of entry

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