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

59 Pages Posted: 21 Oct 2003 Last revised: 7 Dec 2022

See all articles by Daron Acemoglu

Daron Acemoglu

Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Joshua Linn

Massachusetts Institute of Technology (MIT) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2003

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

Suggested Citation

Acemoglu, Daron and Linn, Joshua, Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry (October 2003). NBER Working Paper No. w10038, Available at SSRN: https://ssrn.com/abstract=459409

Daron Acemoglu (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-380b
Cambridge, MA 02142
United States
617-253-1927 (Phone)
617-253-1330 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joshua Linn

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
138
Abstract Views
1,431
Rank
67,246
PlumX Metrics