We develop a model of induced innovation where research effort is a function of the death rate, and thus the potential to reduce deaths in the population. We also consider potential social consequences that arise from this form of induced innovation based on differences in disease prevalence across population subgroups (i.e. race). Our model yields three empirical predictions. First, initial death rates and subsequent research effort should be positively correlated. Second, research effort should be associated with more rapid mortality declines. Third, as a byproduct of targeting the most common conditions in the population as a whole, induced innovation leads to growth in mortality disparities between minority and majority groups. Using information on infant deaths in the U.S. between 1983 and 1998, we find support for all three empirical predictions. We estimate that induced innovation predicts about 20 percent of declines in infant mortality over this period. At the same time, innovation that occurred in response to the most common causes of death favored the majority racial group in the U.S., whites. We estimate that induced innovation contributed about one third of the rise in the black-white infant mortality ratio during our period of study.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
15316.
Length: Date of creation: Sep 2009 Date of revision: Handle: RePEc:nbr:nberwo:15316
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Find related papers by JEL classification: I1 - Health, Education, and Welfare - - Health I12 - Health, Education, and Welfare - - Health - - - Health Production J1 - Labor and Demographic Economics - - Demographic Economics J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities and Races; Non-labor Discrimination
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