IDEAS home Printed from
   My bibliography  Save this paper

Drugs, Market Size and Population


  • Rodrigo Cerda

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)


This paper addresses the upward trend in new drugs introduced by pharmaceutical firms, during the second half of the 20th century. We indicate that the continuous increases in population, and thus in the market size of this sector, will play a fundamental role in explaining these phenomena. We also argue that population and market size can be endogenously determined by drugs through the impact of drugs over the mortality rate. Hence, these two effects reinforce each other, producing decrements in the mortality rate and increments in the stock of drugs over time. We obtained the set of new molecular entities approved by the FDA during the second half of the 20th century and we decomposed the data in a panel of 15 therapeutic categories over time. Using this data, we tested our hypotheses using different econometric methods (FE, GLS, IV, Tobit). The results support the hypothesis and are consistent across methods. The results indicate that an exogenous increase in market size increases initially the number of new drugs. It is notable how this effect is amplified through the feedback effect of drugs over the mortality rate. In the long run, the initial increase on drugs and market size are both amplified in 25 per cent.

Suggested Citation

  • Rodrigo Cerda, 2003. "Drugs, Market Size and Population," Documentos de Trabajo 238, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:238

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Zhang, Jie, 1995. "Social security and endogenous growth," Journal of Public Economics, Elsevier, vol. 58(2), pages 185-213, October.
    Full references (including those not matched with items on IDEAS)


    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. The More the Merrier: Population Growth Promotes Innovation
      by Casey B. Mulligan in Supply and demand (in that order) on 2009-09-23 16:18:00


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Raphaël Godefroy, 2010. "The birth of the congressional clinic," PSE Working Papers halshs-00564921, HAL.
    2. Robert Shimer, 2007. "Daron Acemoglu: 2005 John Bates Clark Medalist," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 191-208, Winter.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ioe:doctra:238. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jaime Casassus). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.