Innovation and Diffusion of Medical Treatment
Barton Hamilton (),
Robert A. Miller and
Nicholas W. Papageorge
No 24577, NBER Working Papers from National Bureau of Economic Research, Inc
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.
JEL-codes: O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hea and nep-ino
Note: AG HE PR
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:24577
Ordering information: This working paper can be ordered from
The price is Paper copy available by mail.
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().