Working Paper: NBER ID: w26679
Authors: Jeffrey Clemens; Parker Rogers
Abstract: We analyze wartime prosthetic device patents to investigate how procurement policy affects the cost, quality, and quantity of medical innovation. Analyzing whether inventions emphasize cost and/or quality requires generating new data. We do this by first hand-coding the economic traits emphasized in 1,200 patent documents. We then train a machine learning algorithm and apply the trained models to a century's worth of medical and mechanical patents that form our analysis sample. In our analysis of these new data, we find that the relatively stingy, fixed-price contracts of the Civil War era led inventors to focus broadly on reducing costs, while the less cost-conscious procurement contracts of World War I did not. We provide a conceptual framework that highlights the economic forces that drive this key finding. We also find that inventors emphasized dimensions of product quality (e.g., a prosthetic's appearance or comfort) that aligned with differences in buyers' preferences across wars. Finally, we find that the Civil War and World War I procurement shocks led to substantial increases in the quantity of prosthetic device patenting relative to patenting in other medical and mechanical technology classes. We conclude that procurement environments can significantly shape the scientific problems with which inventors engage, including the choice to innovate on quality or cost.
Keywords: medical innovation; procurement policies; prosthetic devices; wartime patents
JEL Codes: H57; I1; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fixed-price contracts (D86) | cost-reduction innovation (O39) |
| Civil War and World War I procurement shocks (H56) | quantity of prosthetic device patenting (O34) |
| Civil War era patents (N61) | dimensions of product quality (L15) |
| World War I patents (N44) | emphasis on appearance (D91) |