Medicare and the Rise of American Medical Patenting: The Economics of User-Driven Innovation

81 Pages Posted: 16 Apr 2021

See all articles by Jeffrey P. Clemens

Jeffrey P. Clemens

University of California, San Diego (UCSD) - Department of Economics; NBER

Morten Olsen

University of Copenhagen

Date Written: 2021

Abstract

Innovation is part idea generation and part development. We build a model of “innovating-bydoing,” whereby ideas come to practitioners. Successful innovation requires that practitioners’
ideas be developed through costly effort. Our model nests existing theories of laboratory research
and learning-by-doing. Empirically, we analyze the effect of the U.S. Medicare program on
medical equipment innovation. Our model’s structure allows us to infer the Medicare program’s
aggregate effects. We estimate that Medicare’s introduction led to a 20 to 30 percent increase in
medical equipment patenting across the United States, of which roughly half is due to the
innovating-by-doing channel.

JEL Classification: I130, O380, O310, H510

Suggested Citation

Clemens, Jeffrey P. and Olsen, Morten, Medicare and the Rise of American Medical Patenting: The Economics of User-Driven Innovation (2021). CESifo Working Paper No. 9008, Available at SSRN: https://ssrn.com/abstract=3830213

Jeffrey P. Clemens (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

9500 Gilman Drive
La Jolla, CA 92093-0508
United States

HOME PAGE: http://econweb.ucsd.edu/~j1clemens/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Morten Olsen

University of Copenhagen ( email )

Copenhagen
Copenhagen
Denmark

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