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Is Medicine an Ivory Tower? Induced Innovation, Technological Opportunity, and For-Profit vs. Non-Profit Innovation

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  • Jay Bhattacharya
  • Mikko Packalen

Abstract

This paper examines whether the composition of medical research responds to changes in disease incidence and research opportunities. The paper also provides new evidence on induced pharmaceutical innovation. In both cases we use the change in the demographic structure of the market (measured by age structure and obesity prevalence) to test the induced innovation hypothesis. Technological opportunity is calculated from estimates of structural productivity parameters. The extent of inventive activity is measured from the MEDLINE database on 16 million biomedical publications. We match these data with data on disease incidence. We show that medical research responds to changes in disease incidence and research opportunities. We also find that pharmaceutical innovation responds to aging- and obesity-induced changes in potential market size.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13862.

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Date of creation: Mar 2008
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Handle: RePEc:nbr:nberwo:13862

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  1. Frank R. Lichtenberg, 1998. "The Allocation of Publicly-Funded Biomedical Research," NBER Working Papers 6601, National Bureau of Economic Research, Inc.
  2. Bhattacharya, Jay & Packalen, Mikko, 2012. "The other ex ante moral hazard in health," Journal of Health Economics, Elsevier, vol. 31(1), pages 135-146.
  3. Daron Acemoglu & Joshua Linn, 2003. "Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry," NBER Working Papers 10038, National Bureau of Economic Research, Inc.
  4. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999. "The Induced Innovation Hypothesis And Energy-Saving Technological Change," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 941-975, August.
  5. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence From the Vaccine Industry," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(2), pages 527-564, May.
  6. Frank R. Lichtenberg, 2007. "Importation And Innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 16(6), pages 403-417.
  7. 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 Working Papers 4370, National Bureau of Economic Research, Inc.
  8. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September.
  9. Frank R. Lichtenberg & Joel Waldfogel, 2003. "Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act," NBER Working Papers 9750, National Bureau of Economic Research, Inc.
  10. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(4), pages 765-784, August.
  11. Stefano DellaVigna & Joshua M. Pollet, 2007. "Demographics and Industry Returns," American Economic Review, American Economic Association, vol. 97(5), pages 1667-1702, December.
  12. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
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Cited by:
  1. Mikko Packalen & Jay Bhattacharya, 2010. "The Other Ex-Ante Moral Hazard in Health," Working Papers 1015, University of Waterloo, Department of Economics, revised Dec 2010.
  2. David M. Cutler & Ellen Meara & Seth Richards, 2009. "Induced Innovation and Social Inequality: Evidence from Infant Medical Care," NBER Working Papers 15316, National Bureau of Economic Research, Inc.
  3. Bhattacharya, Jay & Packalen, Mikko, 2011. "Opportunities and benefits as determinants of the direction of scientific research," Journal of Health Economics, Elsevier, vol. 30(4), pages 603-615, July.
  4. repec:hal:wpaper:halshs-00564921 is not listed on IDEAS
  5. Jay Bhattacharya & Neeraj Sood, 2011. "Who Pays for Obesity?," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 139-58, Winter.
  6. Raphaƫl Godefroy, 2010. "The birth of the congressional clinic," PSE Working Papers halshs-00564921, HAL.

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