Endogenous productivity of demand-induced R&D: evidence from pharmaceuticals

• 成果类型: Article
• 署名作者: Myers, Kyle; Pauly, Mark
• 署名单位: Harvard University; University of Pennsylvania
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12289
• 发表日期: 2019
• 页码: 591-614
• 关键词: medicare part d; market-size; INNOVATION; direction; disease; burden; price

摘要

We examine trends in the productivity of the pharmaceutical sector over the past three decades. Motivated by Ricardo's insight that productivity and rents are endogenous to demand when inputs are scarce, we examine the industry's aggregate Research and Development (R&D) production function. Using exogenous demand shocks to instrument investments, we find that demand growth can explain a large portion of R&D growth. Returns to scale have been stable, whereas total factor productivity has declined significantly. Predicted rents based on our estimates and Ricardo's theory closely match the trends we observe.