Working Paper: NBER ID: w16543
Authors: Seth H. Werfel; Adam B. Jaffe
Abstract: Neoclassical economic theory predicts that policies that discourage the consumption of a particular good will induce innovation in a socially desirable substitute. Evolutionary theory emphasizes the possibility of innovation waves associated with the identification of new dominant designs. We incorporate both of these possibilities in a model of the invention of new smoking cessation products, based on a new dataset of patents on such products from 1951-2004. We find that an increase in cigarette tax levels and smoking bans had no discernible impact on the industry-wide rate of invention in smoking cessation products. It does appear, however, that dominant designs did have substantial positive innovation effects. More specifically, the introduction of the nicotine gum and patch are estimated to have increased the rate of patenting activity in smoking cessation products by 60 and 79 percent, respectively, subject to a 10 percent rate of decay. Finally, these products had larger innovation effects at the firm level than among individual inventors.
Keywords: innovation; smoking cessation; public policy; patents
JEL Codes: H23; I18; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Cigarette taxes (H29) | Rate of invention in smoking cessation products (O39) |
| Smoking bans (L66) | Rate of invention in smoking cessation products (O39) |
| Introduction of nicotine gum (Y20) | Rate of patenting activity in smoking cessation products (L65) |
| Introduction of patches (Y20) | Rate of patenting activity in smoking cessation products (L65) |