When the Big One Came: A Natural Experiment on Demand Shocks and Market Structure in India’s Influenza Vaccine Markets
37 Pages Posted: 1 Feb 2016 Last revised: 20 Jul 2020
Date Written: August 14, 2017
This paper examines the relationship between exogenous demand shocks and market structure in India’s influenza vaccine markets. Using a novel dataset of detailed purchasing information for vaccines in the country, and exploiting the occurrence of the 2009-10 global H1N1 pandemic as an exogenous demand shock, we provide evidence of heterogeneous responses to the shock by domestic and multinational vaccine manufacturers in the influenza vaccine market relative to our control group of all other vaccine markets. We find that such a shock results in reversal of market structure for influenza vaccines in India, with a decline in market share of multinational vaccine manufacturers and significant gains in market share of domestic vaccine manufacturers. This reversal of the market structure is driven by increased innovation efforts by domestic vaccine manufacturers, whose effects persist even after the shock is over. Finally, we examine the role of targeted policy instruments aimed at stimulating innovation in domestic vaccine manufacturers. Our results remain robust to the use of alternative controls, synthetic controls, and various estimation methodologies. They provide new evidence regarding the role of demand shocks in creating differential incentives for domestic and multinational vaccine manufacturers to innovate in an emerging economy context. In addition, our results offer useful insights into the role of policy regarding pandemic preparedness in emerging markets facing adverse welfare effects from pandemics.
Keywords: demand shocks, influenza, innovation, emerging economy, public policy, natural experiment
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