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The Welfare Analysis of Product Innovations, with an Application to Computed Tomography Scanners

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  • Trajtenberg, Manuel

Abstract

This paper puts forward a methodology for the measurement of product innovations using a value metric, that is, equating the "magnitude" of innovations with the welfare gains they generate. This research design is applied to the case of computed tomography scanners, a revolutionary innovation in medical technology. The econometric procedure centers on the estimation of a discrete choice model (the nested multinomial logit), which yields the parameters of a utility function defined over the changing quality dimensions of the innovative product. The estimated flow of social gains from innovation is used to compute a social rate of return to R&D, to explore the interrelation between innovation and diffusion, and to trace the time profile of benefits. Copyright 1989 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 97 (1989)
Issue (Month): 2 (April)
Pages: 444-79

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Handle: RePEc:ucp:jpolec:v:97:y:1989:i:2:p:444-79

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Web page: http://www.journals.uchicago.edu/JPE/

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