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21. Who Benefits from Pharmaceutical Price Controls? Evidence from India

Author:
Emma Boswell Dean
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
With the goal of driving down drug costs, governments across the globe have instituted various forms of pharmaceutical price control policies. Understanding the impacts of such policies is particularly important in low- and middle-income countries, where lack of insurance coverage means that prices can serve as a barrier to access for patients. In this paper, we examine the theoretical and empirical effects of one implementation of pharmaceutical price controls, in which the Indian government placed price ceilings on a set of essential medicines. We find that the legislation resulted in broadly declining prices amongst both directly impacted products and competing products. However, the legislation also led to decreased sales of price-controlled and closely related products, preventing trade that would have otherwise occurred. The sales of small, local generics manufacturers were most impacted by the legislation, seeing a 14.5 percent decrease in market share and a 5.3 percent decrease in sales. These products tend to be inexpensive, but we use novel data to show that they are also of lower average quality. We provide evidence that the legislation impacted consumer types differentially. The benefits of the legislation were largest for quality-sensitive consumers, while the downsides largely affected poor and rural consumers, two groups already suffering from low access to medicines.
Topic:
Medicine, Pharmaceuticals, Price, and Price Control
Political Geography:
Global Focus

22. Approaches to Price Formation in Financialised Commodity Markets

Author:
Sophie van Huellen
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
A recent debate over the financialisation of commodity markets has stimulated the development of approaches to price formation which incorporate index traders as a new trader category in commodity futures markets. I survey these new approaches by retracing their emergence to traditional price formation models and show that these new models arise from a synthesis between commodity arbitrage pricing and asset pricing theories in the tradition of Keynesian inspired hedging pressure models. Based on these insights, I derive testable hypotheses to provide guidance for a growing literature that seeks to empirically evaluate the effects of index traders on price discovery and risk management in commodity futures markets.
Topic:
Markets, Finance, Investment, Commodities, and Price
Political Geography:
Global Focus

23. Price Discovery in Commodity Futures and Cash Markets with Heterogenous Agents

Author:
Sophie van Huellen
Publication Date:
11-2018
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The paper develops a price discovery model for commodity futures markets that accounts for two forms of limits to arbitrage caused by transaction costs and noise trader risk. Four market regimes are identified: (1) effective arbitrage, (2) transaction costs but no noise trader risk, (3) no transaction costs but noise trader risk and (4) both transaction costs and noise trader risk. It is shown that commodity prices are driven by both market fundamentals and speculative trader positions under the latter two regimes. Further, speculative effects spill over to the cash market under regime (3) but are confined to the futures market under regime (4). The model is empirically tested using data from six grain and soft commodity markets. While regime (4) is rare and short lived, regime (3) with some noise trader risk and varying elasticity of arbitrage prevails
Topic:
International Trade and Finance, Markets, Investment, Commodities, and Price
Political Geography:
Global Focus

24. Emissions Trading in the Presence of Price-Regulated Polluting Firms: How Costly Are Free Allowances?

Author:
Bruno Lanz and Sebastian Rausch
Publication Date:
01-2015
Content Type:
Working Paper
Institution:
Centre for International Environmental Studies, The Graduate Institute (IHEID)
Abstract:
We study whether to auction or to freely distribute emissions allowances when some firms participating in emissions trading are subject to price regulation. We show that free allowances allocated to price-regulated firms effectively act as a subsidy to output, distort consumer choices, and generally induce higher output and emissions by price-regulated firms. This provides a cost-effectiveness argument for an auction-based allocation of allowances (or equivalently an emissions tax). For real-world economies such as the Unites States, in which about 20 percent of total carbon dioxide emissions are generated by price-regulated electricity producers, our quantitative analysis suggests that free allowances increase economy-wide welfare costs of the policy by 40-80 percent relative to an auction. Given large disparities in regional welfare impacts, we show that the inefficiencies are mainly driven by the emissions intensity of electricity producers in regions with a high degree of price regulation.
Topic:
Climate Change, Regulation, Electricity, Pollution, and Price
Political Geography:
Global Focus