NBER Publications by Stephane Mechoulan

Traditional economic analysis has proposed well known remedies to deal with consumption externalities and inefficient technological change in isolation, but lacks a general framework for addressing them jointly. We argue that the joint determination of R&D and consumption externalities is central to health care industries around the world generally, and for the pharmaceutical industry in particular. This is because technological change drives the expansion of the health care sector and altruism seems to motivate many public subsidies such as Medicaid in the US. We stress that standard remedies to the two problems in isolation are inefficient — Pigouvian corrections to consumption externalities are inefficient under technological change and standard R&D stimuli are inefficient because th...