The competitive shock to the U.S. manufacturing sector spurred by rising China import competition could either catalyze or stifle innovation. Using three distinct sources of variation to identify rising trade exposure, we provide a causal analysis of the effect of surging import competition on U.S. innovative activities. Applying a novel internet-based matching algorithm to map all U.S. utility patents granted by 2013 to firm-level data, and carefully accounting for the shifting concentration of patenting activity across sectors, we document a robust, negative impact of rising Chinese competition on firm-level and technology class-level patent production. Accompanying this fall in innovation, global employment, sales, profitability, and R&D expenditure all decline within trade-exposed firms. The trade-induced contraction along all margins of adjustment and for all measures of valuation suggest that the primary response of firms to greater import competition is to scale back their global operations.

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Foreign Competition and Domestic Innovation: Evidence from U.S. Patents

International Society for Pharmacoeconomics and Outcomes Research

Because of the intangible and highly uncertain nature of innovation, investors may have difficulty processing information associated with a firm’s innovation search strategy. Due to cognitive and s...

/pdf/innovation-search-strategy-and-predictable-returns-1pxvpi6b50.pdf

Innovation Search Strategy and Predictable Returns

We provide a theoretical and empirical analysis of the link between financial and real health care markets. This link is important as financial returns drive investment in medical research and development (R&D), which, in turn, affects real spending growth. We document a “medical innovation premium” of 4–6% annually for equity returns of firms in the health care sector. We interpret this premium as compensating investors for government-induced profit risk, and we provide supportive evidence for this hypothesis through company filings and abnormal return patterns surrounding threats of government intervention. We quantify the implications of the premium for the growth in real health care spending by calibrating our model to match historical trends, predicting the share of gross domestic product (GDP) devoted to health care to be 32% in the long run. Policies that had removed government risk would have led to more than a doubling of medical R&D and would have increased the current share of health care spending by more than 3% of GDP.

/pdf/financial-health-economics-1shdxtht4f.pdf

Financial Health Economics

Sustainability is momentous for the appropriate functioning of health care systems. In fact, health and sustainability are two strictly related values, which could not be separately sought. While studies discussing the contextualization of this issue with respect to the distinguishing attributes of health care systems are rapidly blooming, there is still little agreement about what is ultimately meant by sustainability in the health care arena. On the one hand, attention is primarily focused on the proper use of available financial resources; on the other hand, people engagement and empowerment are gradually arising as a crucial step to enhance the viability of the health care system. This paper tries to identify, from a conceptual point of view inspired by the European integrative movement, the different shades of sustainability in health care and proposes a recipe to strengthen the long-term viability of health care organizations. The balanced mix of financial, economic, political, and social sustainability is compelling to increase the ability of health care organizations to create meaningful value for the population served. However, the focus on a single dimension of sustainability is thought to engender several side effects, which compromise the capability of health care organizations to guarantee health gains at the individual and collective levels. From this standpoint, further conceptual and practical developments are envisioned, paving the way for a full-fledged understanding of sustainability in the health care environment.

https://www.mdpi.com/2071-1050/10/12/4439/pdf

Framing the Shades of Sustainability in Health Care: Pitfalls and Perspectives from Western EU Countries

Medical innovations have improved treatment for many diseases but have simultaneously raised spending on health care. Many health economists believe that technological change is the major factor dr...

/pdf/how-does-technological-change-affect-quality-adjusted-prices-4y5lr6by0e.pdf

How Does Technological Change Affect Quality-Adjusted Prices in Health Care? Systematic Evidence from Thousands of Innovations

This paper investigates the role of novel and incremental innovation in biopharmaceutical markets. Previous research focusing only on novel innovation FDA-approved new molecules has led to the conclusion that the pharmaceutical industry is in a productivity crisis, since R&D spending has increased exponentially while FDA-approved new molecules have remained at over time. I nd that incremental innovation new drugs created by modifying existing FDA-approved molecules accounts for 49% of the health impact of new innovations, and productivity of pharmaceutical innovation has increased 30% between 1980 and 2009 when considering the health impact of both novel and incremental innovations. I construct and estimate a model of how rms trade-o between novel and incremental innovation to predict future innovation trends, and I nd that the productivity of new innovations will decline by 40%

Incremental innovation and pharmaceutical productivity

Individuals respond to pharmaceutical treatments differently due to the heterogeneity of patient populations. This heterogeneity can make it difficult to determine how efficacious or burdensome a treatment is for an individual patient. Personalized medicine involves using patient characteristics, therapeutics, or diagnostic testing to understand how individual patients respond to a given treatment. Personalized medicine increases the health impact of existing treatments by improving the matching process between patients and treatments and by improving a patient's understanding of the risk of serious side effects. In this paper, I compare the health impact of new treatment innovations with the potential health impact of personalized medicine. I find that the impact of personalized medicine depends on the number of treatments, the correlation between treatment effects, and the amount of noise in a patient's individual treatment effect signal. For multiple sclerosis treatments, I find that personalized medicine has the potential to increase the health impact of existing treatments by roughly 50 percent by informing patients of their individual treatment effect and risk of serious side effects.

https://www.nber.org/system/files/working_papers/w23900/w23900.pdf

Measuring the Potential Health Impact of Personalized Medicine: Evidence from MS Treatments

Many countries have large future public liabilities attributable to health care programs However, little explicit analysis exists about how health care policies affect these program liabilities We analyze how reimbursement and approval policies affect public liabilities through their impact on the returns to medical innovation, a central factor driving spending growth We consider how policies impact innovative returns through expected earnings, their risk-adjustment, and their timing and defaults through the approval process Our analysis implies that cutbacks in government programs may raise government liabilities and expansions may lower them We quantitatively calibrate these non-standard effects for the US Medicare program

/pdf/public-liabilities-and-health-care-policy-1s8v3ma8vx.pdf

Kristopher J. Hult

Papers

How Does Technological Change Affect Quality-Adjusted Prices in Health Care? Systematic Evidence from Thousands of Innovations

Incremental innovation and pharmaceutical productivity

Measuring the Potential Health Impact of Personalized Medicine: Evidence from MS Treatments

Public Liabilities and Health Care Policy

Measuring the Potential Health Impact of Personalized Medicine: Evidence from Multiple Sclerosis Treatments