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Innovation and Diffusion of Medical Treatment

Author

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  • Barton H. Hamilton
  • Andrés Hincapié
  • Robert A. Miller
  • Nicholas W. Papageorge

Abstract

This paper develops and estimates a dynamic structural model of demand for a multi-attribute product. The demand side equilibrium supports a product spectrum, the characteristics of which evolve over time in response to supply innovations induced by the composition and extent of aggregate demand. The direction and speed of innovation is inefficient because individuals create an externality by not accounting for their influence on the discovery process. We apply the model to drugs invented to combat the HIV epidemic, during which frequent, incremental innovations in medication were punctuated by sporadic breakthroughs. In this application products differ in their efficacy and their propensity to cause side effects. Our biennial data on four American cities track a replenished panel of individuals for over twenty years, from when drugs were not only ineffective but also created debilitating side effects, to when the market matured. We find that the externalities are quantitatively important and that even a temporary subsidy would have improved average social welfare and been more equitable.

Suggested Citation

  • Barton H. Hamilton & Andrés Hincapié & Robert A. Miller & Nicholas W. Papageorge, 2018. "Innovation and Diffusion of Medical Treatment," NBER Working Papers 24577, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:24577
    Note: AG EH PR
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    References listed on IDEAS

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    Cited by:

    1. Marcella Alsan & Marianne Wanamaker, 2018. "Tuskegee and the Health of Black Men," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(1), pages 407-455.
    2. Mette Ejrnæs & Esteban García-Miralles & Mette Gørtz & Petter Lundborg, 2022. "When Death was Postponed: The Effect of HIV Medication on Work and Marriage," CEBI working paper series 22-08, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    3. Nicholas W. Papageorge, 2021. "Modeling Behavior during a Pandemic: Using HIV as an Historical Analogy," NBER Working Papers 28898, National Bureau of Economic Research, Inc.
    4. Ejrnæs, Mette & García-Miralles, Esteban & Gørtz, Mette & Lundborg, Petter, 2023. "When Death Was Postponed: The Effect of HIV Medication on Work, Savings, and Marriage," IZA Discussion Papers 16228, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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