This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on … pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with … overutilization of health care. Our study of innovation in the pharmaceutical industry emphasizes the interaction of these incentives …

-constraints and the profitability of engaging in innovation (R&D). We decompose the effects of RER changes on productivity growth …

-run growth by increasing the profit from innovation. In the short run, factors of production must be reallocated inside firms …, which lowers the opportunity cost of innovation, generating an additional trapped factor effect. Starting from a baseline …