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Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry

  • Daron Acemoglu
  • Joshua Linn

This paper investigates the effect of (potential) market size on entry of new drugs and pharmaceutical innovation. Focusing on exogenous changes driven by U. S. demographic trends, we find a large effect of potential market size on the entry of nongeneric drugs and new molecular entities. These effects are generally robust to controlling for a variety of supply-side factors and changes in the technology of pharmaceutical research. © 2004 MIT Press

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 228400000000000002.

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Date of creation: 19 Aug 2004
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Handle: RePEc:cla:levarc:228400000000000002
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  13. Stavins, Robert & Jaffe, Adam & Newell, Richard, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," Discussion Papers dp-98-12-rev, Resources For the Future.
  14. Amy Finkelstein, 2003. "Health Policy and Technological Change: Evidence from the Vaccine Industry," NBER Working Papers 9460, National Bureau of Economic Research, Inc.
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  16. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  17. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  18. Hausman, Jerry & Hall, Bronwyn H & Griliches, Zvi, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," Econometrica, Econometric Society, vol. 52(4), pages 909-38, July.
  19. Ariel Pakes & Zvi Griliches, 1980. "Patents and R and D at the Firm Level: A First Look," NBER Working Papers 0561, National Bureau of Economic Research, Inc.
  20. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
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  25. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  26. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G., 2003. "The price of innovation: new estimates of drug development costs," Journal of Health Economics, Elsevier, vol. 22(2), pages 151-185, March.
  27. Cockburn, Iain M. & Henderson, Rebecca M., 2001. "Scale and scope in drug development: unpacking the advantages of size in pharmaceutical research," Journal of Health Economics, Elsevier, vol. 20(6), pages 1033-1057, November.
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