INNOVATION AND DIFFUSION OF MEDICAL TREATMENT

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

doi:10.1111/iere.12505

INNOVATION AND DIFFUSION OF MEDICAL TREATMENT

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

Research output: Contribution to journal › Article › peer-review

Abstract

We develop and estimate a dynamic structural model of demand in a setting where product characteristics endogenously evolve in response to aggregate consumer choices. The direction and speed of innovation are inefficient because individuals do not account for their influence on innovation, creating an externality. Our application focuses on drugs invented to combat human immunodeficiency virus; they differ in their efficacy and propensity to cause side effects. We find that the externality is quantitatively important; temporarily subsidizing the experimental treatment would have increased average social welfare by improving average health and would have reduced inequality in lifetime utility across health groups.

Original language	English
Pages (from-to)	953-1009
Number of pages	57
Journal	International Economic Review
Volume	62
Issue number	3
DOIs	https://doi.org/10.1111/iere.12505
State	Published - Aug 2021

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10.1111/iere.12505

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title = "INNOVATION AND DIFFUSION OF MEDICAL TREATMENT",

abstract = "We develop and estimate a dynamic structural model of demand in a setting where product characteristics endogenously evolve in response to aggregate consumer choices. The direction and speed of innovation are inefficient because individuals do not account for their influence on innovation, creating an externality. Our application focuses on drugs invented to combat human immunodeficiency virus; they differ in their efficacy and propensity to cause side effects. We find that the externality is quantitatively important; temporarily subsidizing the experimental treatment would have increased average social welfare by improving average health and would have reduced inequality in lifetime utility across health groups.",

author = "Hamilton, \{Barton H.\} and Andr{\'e}s Hincapi{\'e} and Miller, \{Robert A.\} and Papageorge, \{Nicholas W.\}",

note = "Publisher Copyright: {\textcopyright} (2021) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association",

year = "2021",

month = aug,

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journal = "International Economic Review",

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AU - Hamilton, Barton H.

AU - Hincapié, Andrés

AU - Miller, Robert A.

AU - Papageorge, Nicholas W.

N1 - Publisher Copyright: © (2021) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

PY - 2021/8

Y1 - 2021/8

N2 - We develop and estimate a dynamic structural model of demand in a setting where product characteristics endogenously evolve in response to aggregate consumer choices. The direction and speed of innovation are inefficient because individuals do not account for their influence on innovation, creating an externality. Our application focuses on drugs invented to combat human immunodeficiency virus; they differ in their efficacy and propensity to cause side effects. We find that the externality is quantitatively important; temporarily subsidizing the experimental treatment would have increased average social welfare by improving average health and would have reduced inequality in lifetime utility across health groups.

AB - We develop and estimate a dynamic structural model of demand in a setting where product characteristics endogenously evolve in response to aggregate consumer choices. The direction and speed of innovation are inefficient because individuals do not account for their influence on innovation, creating an externality. Our application focuses on drugs invented to combat human immunodeficiency virus; they differ in their efficacy and propensity to cause side effects. We find that the externality is quantitatively important; temporarily subsidizing the experimental treatment would have increased average social welfare by improving average health and would have reduced inequality in lifetime utility across health groups.

UR - https://www.scopus.com/pages/publications/85102433313

U2 - 10.1111/iere.12505

DO - 10.1111/iere.12505

M3 - Article

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SN - 0020-6598

VL - 62

SP - 953

EP - 1009

JO - International Economic Review

JF - International Economic Review

IS - 3

ER -

INNOVATION AND DIFFUSION OF MEDICAL TREATMENT

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