What Drives Innovation? Lessons from COVID-19 R&D

Ruchir Agarwal; Patrick Gaule

doi:10.1016/j.jhealeco.2022.102591

What Drives Innovation? Lessons from COVID-19 R&D

Ruchir Agarwal, Patrick Gaule

School of Economics

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Abstract

This paper studies the global R&D effort to fight the deadliest diseases. We find: (1) the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) given this elasticity, the R&D response to COVID-19 has been 4 to 26 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by the aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases;and (4) public institutions and government-led incentives were a key driver ofthe COVID-19 R&D effort—with public research institutions accounting for 70percent of all COVID-19 clinical trials globally. Overall, our work suggests that leveraging early-stage incentives, non-monetary incentives, and public institutions may be important for scaling up global innovation.

Original language	English
Article number	102591
Journal	Journal of Health Economics
Volume	82
Early online date	24 Jan 2022
DOIs	https://doi.org/10.1016/j.jhealeco.2022.102591
Publication status	Published - 1 Mar 2022

Bibliographical note

Funding Information:
We thank Pierre Azoulay, Dan Cao, Jeff Clemens, Annamaria Conti, Tom Cunningham, Ehsan Ebrahimy, Dominique Foray, Ina Ganguli, Stefano Giglio, Jonathan Gruber, Luigi Iovino, Miles Kimball, Nikolas Mittag, Morten Olsen, Ammon Salter, Rossella Salandra, Sarah Smith, Holger Spamann, Stan Veuger, Heidi Williams and Yanos Zylberberg. Further, as economists who study science, we are humbled by the ingenuity and tireless effort of scientists, health workers, regulators, industry participants and others who brought about an unprecedented scientific response to fight the COVID-19 pandemic. All errors are our own. The views expressed therein are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Publisher Copyright:
© 2022

Research Groups and Themes

ECON CEPS Health
ECON Applied Economics

Keywords

COVID-19
Innovation
Market Size
Pharmaceutical industry

Access to Document

10.1016/j.jhealeco.2022.102591

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title = "What Drives Innovation? Lessons from COVID-19 R&D",

abstract = "This paper studies the global R&D effort to fight the deadliest diseases. We find: (1) the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) given this elasticity, the R&D response to COVID-19 has been 4 to 26 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by the aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases;and (4) public institutions and government-led incentives were a key driver ofthe COVID-19 R&D effort—with public research institutions accounting for 70percent of all COVID-19 clinical trials globally. Overall, our work suggests that leveraging early-stage incentives, non-monetary incentives, and public institutions may be important for scaling up global innovation.",

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N2 - This paper studies the global R&D effort to fight the deadliest diseases. We find: (1) the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) given this elasticity, the R&D response to COVID-19 has been 4 to 26 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by the aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases;and (4) public institutions and government-led incentives were a key driver ofthe COVID-19 R&D effort—with public research institutions accounting for 70percent of all COVID-19 clinical trials globally. Overall, our work suggests that leveraging early-stage incentives, non-monetary incentives, and public institutions may be important for scaling up global innovation.

AB - This paper studies the global R&D effort to fight the deadliest diseases. We find: (1) the elasticity of R&D effort with respect to market size is about 1/2 in the cross-section of diseases; (2) given this elasticity, the R&D response to COVID-19 has been 4 to 26 times greater than that implied by its market size; (3) the aggregate short-term elasticity of science and innovation can be very large, as demonstrated by the aggregate flow of clinical trials increasing by 38% in 2020, with limited crowding out of trials for non-COVID diseases;and (4) public institutions and government-led incentives were a key driver ofthe COVID-19 R&D effort—with public research institutions accounting for 70percent of all COVID-19 clinical trials globally. Overall, our work suggests that leveraging early-stage incentives, non-monetary incentives, and public institutions may be important for scaling up global innovation.

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KW - Market Size

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What Drives Innovation? Lessons from COVID-19 R&D

Abstract

Bibliographical note

Research Groups and Themes

Keywords

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