American Economic Review, (2015): 105, no. 7, 2044-2085. [PDF]
We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials — and hence, project durations — are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (non-mortality) clinical-trial endpoints, targeted R&D subsidies, and patent design.
Winner- the Kauffman/iHEA Award for Health Care Entrepreneurship and Innovation Research
Winner- the Arrow Award for “best paper published in health economics” in 2015
Seminar Slides, April 2015. [PDF]