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

Ruchir Agarwal, Patrick Gaule

Research output: Contribution to journalArticle (Academic Journal)peer-review

17 Citations (Scopus)
13 Downloads (Pure)


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 languageEnglish
Article number102591
JournalJournal of Health Economics
Early online date24 Jan 2022
Publication statusPublished - 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

Structured keywords

  • ECON CEPS Health
  • ECON Applied Economics


  • COVID-19
  • Innovation
  • Market Size
  • Pharmaceutical industry


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