Innovation and Diffusion of Medical Treatment / Barton H. Hamilton, Andrés Hincapié, Robert A. Miller, Nicholas W. Papageorge.

Format:

Book

Author/Creator:

Hamilton, Barton H.

Contributor:

National Bureau of Economic Research.

Hincapié, Andrés.

Miller, Robert A.

Papageorge, Nicholas W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24577.

NBER working paper series no. w24577

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

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.

Notes:

Print version record

May 2018.