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

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Author Info
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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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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Find related papers by JEL classification:
I1 - Health, Education, and Welfare - - Health
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
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  1. 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. [Downloadable!] (restricted)
  2. Frank R. Lichtenberg, 2006. "Importation and Innovation," NBER Working Papers 12539, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 765-784, August. [Downloadable!] (restricted)
  4. Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1049-1090, August. [Downloadable!] (restricted)
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  5. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September. [Downloadable!] (restricted)
  6. Amy Finkelstein, 2004. "Static and Dynamic Effects of Health Policy: Evidence From the Vaccine Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 527-564, May. [Downloadable!] (restricted)
  7. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March. [Downloadable!] (restricted)
  8. 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. [Downloadable!] (restricted)
  9. Jay Bhattacharya & Mikko Packalen, 2008. "The Other Ex-Ante Moral Hazard in Health," NBER Working Papers 13863, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. 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, vol. 114(3), pages 941-975, August. [Downloadable!] (restricted)
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  11. Stefano DellaVigna & Joshua M. Pollet, 2007. "Demographics and Industry Returns," American Economic Review, American Economic Association, vol. 97(5), pages 1667-1702, December.
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