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Induced Innovation And Social Inequality: Evidence From Infant Medical Care

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Executive Summary

The authors develop a model of induced innovation where research effort is a function of the death rate, and thus the potential to reduce deaths in the population. They also consider potential social consequences that arise from this form of induced innovation based on differences in disease prevalence across population subgroups (i.e. race). The model yields three empirical predictions. First, initial death rates and subsequent research effort should be positively correlated. Second, research effort should be associated with more rapid mortality declines. Third, as a byproduct of targeting the most common conditions in the population as a whole, induced innovation leads to growth in mortality disparities between minority and majority groups.

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