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

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Date

Aug. 1, 2004

Authors

Daron Acemoglu and Joshua Linn

Publication

Journal Article

Reading time

1 minute

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 a large effect of potential market size on the entry of nongeneric drugs and new molecular entities. These effects are generally robust to controlling for a variety of supply-side factors and changes in the technology of pharmaceutical research.

View Journal Article

Authors

Daron Acemoglu

Joshua Linn

Senior Fellow

Josh Linn is a senior fellow at RFF. His research centers on the effects of environmental policies and economic incentives for new technologies in the transportation, electricity, and industrial sectors.

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