Do Firms Underinvest in Long-Term Research? Evidence from Cancer Clinical Trials

Eric Budish, Benjamin N. Roin and Heidi Williams ()

American Economic Review, 2015, vol. 105, issue 7, 2044-85

Abstract: We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials—and hence, project durations—are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (non-mortality) clinical-trial endpoints, targeted R&D subsidies, and patent design. (JEL D92, G31, I11, L65, O31, O34)

JEL-codes: D92 G31 I11 L65 O31 O34 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20131176
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Citations: View citations in EconPapers (84)

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Working Paper: Do firms underinvest in long-term research? Evidence from cancer clinical trials (2013)
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