Why Does the US Prevent Parallel Imports?
Author(s)
Yih-Ming Lin*
ABSTRACT
Most studies on parallel trade conclude that parallel imports, in
general, benefit the importing country because it lowers the price of parallel
imports and benefits to the consumers in the importing country. Richardson [1]
explicitly indicates that there is no importing country not to permit parallel
imports because they are discriminated against in its absence. However, an
obvious counter example is observed in the US. In this paper, we propose a
two-country model of parallel trade with innovation to explain why some
countries, such as the US would like to prevent parallel imports. We show that
the elasticity of innovation is crucial to the welfare of importing country and
global welfare.
Cite this paper
Y. Lin, "Why Does the US Prevent Parallel Imports?," Theoretical Economics Letters, Vol. 3 No. 6, 2013, pp. 322-327. doi: 10.4236/tel.2013.36054.
Y. Lin, "Why Does the US Prevent Parallel Imports?," Theoretical Economics Letters, Vol. 3 No. 6, 2013, pp. 322-327. doi: 10.4236/tel.2013.36054.
References
[1] M. Richardson, “An Elementary Proposition Concerning Parallel Imports,” Journal of International Economics, Vol. 56, No. 1, 2002, pp. 233-245.
http://dx.doi.org/10.1016/S0022-1996(01)00110-6 [2] D. A. Malueg and M. Schwartz, “Parallel Imports, Demand Dispersion, and International Price Discrimination,” Journal of International Economics, Vol. 37, No. 3-4, 1994, pp. 167-195.
http://dx.doi.org/10.1016/0022-1996(94)90044-2 [3] K. E. Maskus and Y. Chen, “Parallel Imports in a Model of Vertical Distribution: Theory and Evidence and Policy,” Pacific Economic Review, Vol. 7, No. 2, 2002, pp. 319-334.
http://dx.doi.org/10.1111/1468-0106.00167 [4] K. E. Maskus and Y. Chen, “Vertical Price Control and Parallel Imports: Theory and Evidence,” Review of International Economic, Vol. 12, No. 4, 2004, pp. 551-570.
http://dx.doi.org/10.1111/j.1467-9396.2004.00467.x [5] Y. Chen and K. E. Maskus, “Vertical Pricing and Parallel Imports,” Journal of International Trade and Economic Development, Vol. 14, No. 1, 2005, pp. 1-18.
http://dx.doi.org/10.1080/0963819042000333225 [6] K. E. Maskus, “Intellectual Property Rights in the Global Economy,” Institute for International Economics, Washington DC, 2000. [7] K. E. Maskus, “Parallel Imports,” The World Economy, Vol. 23, No. 9, 2002, pp. 1269-1284.
http://dx.doi.org/10.1111/1467-9701.00329 [8] H. Varian, “Price Discrimination and Social Welfare,” American Economic Review, Vol. 75, 1985, pp. 870-875. [9] C. Li and K. E. Maskus, “The Impact of Parallel Imports on Investments in Cost-Reducing Research and Development,” Journal of International Economics, Vol. 68, No. 2, 2006, pp. 443-455.
http://dx.doi.org/10.1016/j.jinteco.2005.07.006 [10] C. Li and J. Robles, “Product Innovation and Parallel Trade,” International Journal of Industrial Organization, Vol. 25, No. 2, 2007. pp. 417-429.
http://dx.doi.org/10.1016/j.ijindorg.2006.03.007 [11] C. Li, “Vertical Product Innovation and Parallel Imports,” Singapore Economic Review, Vol. 50, No. 1, 2005, pp. 35-46. http://dx.doi.org/10.1142/S0217590805001822 [12] C. Li, “Competition, Parallel Imports and Cost-Reducing Innovation,” Scottish Journal of Political Economy, Vol. 53, No. 3, 2006, pp. 377-397.
http://dx.doi.org/10.1111/j.1467-9485.2006.00385.x [13] A. V. Deardorff, “Welfare Effects of Global Patent Protection,” Economica, Vol. 59, No. 233, 1992, pp. 35-51.
http://dx.doi.org/10.2307/2555064 [14] S. Scotchmer, “The Political Economy of Intellectual Property Treaties,” Journal of Law, Economics, and Organizations, Vol. 20, No. 2, 2004, pp. 415-437.
http://dx.doi.org/10.1093/jleo/ewh040 [15] G. M. Grossman and E. L. C. Lai, “International Protection of Intellectual Property,” American Economic Review, Vol. 94, No. 5, 2004, pp. 1635-1653.
http://dx.doi.org/10.1257/0002828043052312
[1] M. Richardson, “An Elementary Proposition Concerning Parallel Imports,” Journal of International Economics, Vol. 56, No. 1, 2002, pp. 233-245.
http://dx.doi.org/10.1016/S0022-1996(01)00110-6 [2] D. A. Malueg and M. Schwartz, “Parallel Imports, Demand Dispersion, and International Price Discrimination,” Journal of International Economics, Vol. 37, No. 3-4, 1994, pp. 167-195.
http://dx.doi.org/10.1016/0022-1996(94)90044-2 [3] K. E. Maskus and Y. Chen, “Parallel Imports in a Model of Vertical Distribution: Theory and Evidence and Policy,” Pacific Economic Review, Vol. 7, No. 2, 2002, pp. 319-334.
http://dx.doi.org/10.1111/1468-0106.00167 [4] K. E. Maskus and Y. Chen, “Vertical Price Control and Parallel Imports: Theory and Evidence,” Review of International Economic, Vol. 12, No. 4, 2004, pp. 551-570.
http://dx.doi.org/10.1111/j.1467-9396.2004.00467.x [5] Y. Chen and K. E. Maskus, “Vertical Pricing and Parallel Imports,” Journal of International Trade and Economic Development, Vol. 14, No. 1, 2005, pp. 1-18.
http://dx.doi.org/10.1080/0963819042000333225 [6] K. E. Maskus, “Intellectual Property Rights in the Global Economy,” Institute for International Economics, Washington DC, 2000. [7] K. E. Maskus, “Parallel Imports,” The World Economy, Vol. 23, No. 9, 2002, pp. 1269-1284.
http://dx.doi.org/10.1111/1467-9701.00329 [8] H. Varian, “Price Discrimination and Social Welfare,” American Economic Review, Vol. 75, 1985, pp. 870-875. [9] C. Li and K. E. Maskus, “The Impact of Parallel Imports on Investments in Cost-Reducing Research and Development,” Journal of International Economics, Vol. 68, No. 2, 2006, pp. 443-455.
http://dx.doi.org/10.1016/j.jinteco.2005.07.006 [10] C. Li and J. Robles, “Product Innovation and Parallel Trade,” International Journal of Industrial Organization, Vol. 25, No. 2, 2007. pp. 417-429.
http://dx.doi.org/10.1016/j.ijindorg.2006.03.007 [11] C. Li, “Vertical Product Innovation and Parallel Imports,” Singapore Economic Review, Vol. 50, No. 1, 2005, pp. 35-46. http://dx.doi.org/10.1142/S0217590805001822 [12] C. Li, “Competition, Parallel Imports and Cost-Reducing Innovation,” Scottish Journal of Political Economy, Vol. 53, No. 3, 2006, pp. 377-397.
http://dx.doi.org/10.1111/j.1467-9485.2006.00385.x [13] A. V. Deardorff, “Welfare Effects of Global Patent Protection,” Economica, Vol. 59, No. 233, 1992, pp. 35-51.
http://dx.doi.org/10.2307/2555064 [14] S. Scotchmer, “The Political Economy of Intellectual Property Treaties,” Journal of Law, Economics, and Organizations, Vol. 20, No. 2, 2004, pp. 415-437.
http://dx.doi.org/10.1093/jleo/ewh040 [15] G. M. Grossman and E. L. C. Lai, “International Protection of Intellectual Property,” American Economic Review, Vol. 94, No. 5, 2004, pp. 1635-1653.
http://dx.doi.org/10.1257/0002828043052312