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Induced innovation and technology trajectory: Evidence from smoking cessation products

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  • Werfel, Seth H.
  • Jaffe, Adam B.

Abstract

Economic theory predicts that policies that discourage the consumption of a particular good will induce innovation in a socially desirable substitute. However, the literature on technology trajectories emphasizes the possibility of innovation waves associated with the identification of new dominant designs. We incorporate both of these possibilities in a model of the invention of new smoking cessation products, based on a new dataset of patents on such products from 1951 to 2004. We find that an increase in cigarette tax levels had no discernible impact on the industry-wide rate of invention in smoking cessation products. However, we do find evidence consistent with the emergence of dominant designs having substantial positive innovation effects. We estimate that the introduction of the nicotine gum and patch increased the overall rate of patenting activity in smoking cessation products by 60–75%, subject to a 10% rate of decay. Finally, we show that these products had greater effects on the patenting of corporations than individual inventors.

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Bibliographic Info

Article provided by Elsevier in its journal Research Policy.

Volume (Year): 42 (2013)
Issue (Month): 1 ()
Pages: 15-22

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Handle: RePEc:eee:respol:v:42:y:2013:i:1:p:15-22

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Web page: http://www.elsevier.com/locate/respol

Related research

Keywords: Induced innovation; Technology trajectory; Smoking cessation products; Cigarette taxes;

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References

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  1. Yin, Wesley, 2008. "Market incentives and pharmaceutical innovation," Journal of Health Economics, Elsevier, vol. 27(4), pages 1060-1077, July.
  2. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
  3. Tauras, John A., 2004. "Public policy and smoking cessation among young adults in the United States," Health Policy, Elsevier, vol. 68(3), pages 321-332, June.
  4. Nick Johnstone & Ivan Haščič & David Popp, 2010. "Renewable Energy Policies and Technological Innovation: Evidence Based on Patent Counts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(1), pages 133-155, January.
  5. Tauras, John A. & Chaloupka, Frank J. & Emery, Sherry, 2005. "The impact of advertising on nicotine replacement therapy demand," Social Science & Medicine, Elsevier, vol. 60(10), pages 2351-2358, May.
  6. Daron Acemoglu & David Cutler & Amy Finkelstein & Joshua Linn, 2006. "Did Medicare Induce Pharmaceutical Innovation?," NBER Working Papers 11949, National Bureau of Economic Research, Inc.
  7. Kortum, Samuel & Lerner, Josh, 1999. "What is behind the recent surge in patenting?1," Research Policy, Elsevier, vol. 28(1), pages 1-22, January.
  8. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc.
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  10. Ricardo J. Caballero & Adam B. Jaffe, 1993. "How High are the Giants' Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 15-86 National Bureau of Economic Research, Inc.
  11. Baltagi, Badi H & Levin, Dan, 1986. "Estimating Dynamic Demand for Cigarettes Using Panel Data: The Effects of Bootlegging, Taxation and Advertising Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 148-55, February.
  12. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 22(2), pages 102-103, April.
  13. Adam B. Jaffe & Karen Palmer, 1996. "Environmental Regulation and Innovation: A Panel Data Study," NBER Working Papers 5545, National Bureau of Economic Research, Inc.
  14. John A. Tauras, 2006. "Smoke-Free Air Laws, Cigarette Prices, and Adult Cigarette Demand," Economic Inquiry, Western Economic Association International, vol. 44(2), pages 333-342, April.
  15. John A. Tauras & Frank J. Chaloupka, 2001. "The Demand for Nicotine Replacement Therapies," NBER Working Papers 8332, National Bureau of Economic Research, Inc.
  16. Hamilton, James L, 1972. "The Demand for Cigarettes: Advertising, the Health Scare, and the Cigarette Advertising Ban," The Review of Economics and Statistics, MIT Press, vol. 54(4), pages 401-11, November.
  17. David Popp, 2003. "Pollution control innovations and the Clean Air Act of 1990," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(4), pages 641-660.
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