NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Seth H. Werfel

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Working Papers

November 2010Induction and Evolution in the Origin of Inventions: Evidence from Smoking Cessation Products
with Adam B. Jaffe: w16543
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 estim...

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