Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry

Daron Acemoglu and Joshua Linn

No 10038, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the effect of (potential) market size on entry of new drugs and pharmaceutical innovation. Focusing on exogenous changes driven by U.S. demographic trends, we find that a 1 percent increase in the potential market size for a drug category leads to a 4 to 6 percent increase in the number of new drugs in that category. This response comes from both the entry of generic drugs and new non-generic drugs, and is generally robust to controlling for a variety of non-profit factors, pre-existing trends

JEL-codes: O31 O33 (search for similar items in EconPapers)
Date: 2003-10
New Economics Papers: this item is included in nep-ent and nep-tid
Note: EH IO PR
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Citations: View citations in EconPapers (15)

Published as Daron Acemoglu & Joshua Linn, 2004. "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 1049-1090, August.

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Related works:
Journal Article: Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry (2004)
Working Paper: Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry (2004)
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