 Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as "equipment for your health"Frank Lichtenberg and Suchin Virabhak No 9351, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: Several econometric studies have concluded that technical progress embodied in equipment is a major source of manufacturing productivity growth. Other research has suggested that, over the long run, growth in the U.S. economy's 'health output' has been at least as large as the growth in non-health goods and services. One important input in the production of health pharmaceuticals is even more R&D- intensive than equipment. In this paper we test the pharmaceutical-embodied technical progress hypothesis the hypothesis that newer drugs increase the length and quality of life and estimate the rate of progress. To do this, we estimate health production functions, in which the dependent variables are various indicators of post-treatment health status (such as survival, perceived health status, and presence of physical or cognitive limitations), and the regressors include drug vintage (the year in which the FDA first approved a drug's active ingredient(s)) and indicators of pre-treatment health status. We estimate these relationships using extremely disaggregated prescription- level cross-sectional data derived primarily from the 1997 Medical Expenditure Panel Survey. We find that people who used newer drugs had better post-treatment health than people using older drugs for the same condition, controlling for pre-treatment health, age, sex, race, marital status, education, income, and insurance coverage: they were more likely to survive, their perceived health status was higher, and they experienced fewer activity, social, and physical limitations. The estimated cost of the increase in vintage required to keep a person alive is lower than some estimates of the value of remaining alive for one month. One estimate of the cost of preventing an activity limitation is $1745, and the annual rate of technical progress with respect to activity limitations is 8.4%. People consuming newer drugs tend to experience greater increases (or smaller declines) in physical ability than people consuming older drugs. Most of the health measures indicate that the effect of drug vintage on health is higher for people with low initial health than it is for people with high initial health. Therefore in contrast to equipment-embodied technical progress economic inequality, pharmaceutical-embodied technical progress has a tendency to reduce inequality as well as promote economic growth, broadly defined. JEL-codes: I12 L65 (search for similar items in EconPapers) Published as Frank R. Lichtenberg & Suchin Virabhak, 2007. "Pharmaceutical-embodied technical progress, longevity, and quality of life: drugs as 'Equipment for Your Health'," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 371-392. Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:9351 Ordering information: This working paper can be ordered from 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. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.