Working Paper: NBER ID: w1724
Authors: Manuel Trajtenberg
Abstract: The main goal of this paper is to put forward a methodology for the measurement of product innovations using a value metric, i.e., equating the "magnitude" of innovations with the welfare gains that they generate. This research design is applied to the case of Computed Tomography (CT) Scanners, a revolutionary innovation in medical technology. The econometric procedure centers on the estimation of a discrete choice model (the nested multinominal logit), that yeilds the parameters of a utility function defined over the-changing-quality dimensions of the innovative product. The estimated flow of social gains from innovation is used primarily to compute a social rate of return to R&D, to explore the interrelation between innovation and diffusion, and to trace the time profile of benefits and costs, the latter suggesting the possible occurance of "technological cycles".
Keywords: Product Innovations; CT Scanners; Welfare Gains; Econometric Analysis; Health Economics
JEL Codes: O31; I11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| product innovations (O35) | social gains (P26) |
| CT scanners (L63) | diagnostic capabilities (C52) |
| diagnostic capabilities (C52) | overall welfare (I31) |
| R&D investments in CT technology (O39) | social rate of return (H43) |
| diffusion of innovations (O33) | technological cycles (O33) |
| initial benefits (J32) | downturn in market dynamics (E32) |
| downturn in market dynamics (E32) | stabilization as technology matures (O33) |