TY  - JOUR
AU  - Budish, Eric
AU  - Roin, Benjamin N
AU  - Williams, Heidi
TI  - Do firms underinvest in long-term research? Evidence from cancer clinical trials
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19430
PY  - 2013
Y2  - September 2013
DO  - 10.3386/w19430
UR  - http://www.nber.org/papers/w19430
L1  - http://www.nber.org/papers/w19430.pdf
N1  - Author contact info:
Eric Budish
Booth School of Business
University of Chicago
5807 South Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-8453
E-Mail: eric.budish@chicagobooth.edu

Benjamin N. Roin
Massachusetts Institute of Technology
E-Mail: broin@mit.edu

Heidi L. Williams
Department of Economics
Stanford University
579 Jane Stanford Way
Office 323
Stanford, CA 94305
Tel: (650) 723-9303
E-Mail: hlwill@stanford.edu
M2  - featured in NBER digest on 2014-01-24
AB  - We investigate whether private research investments are distorted away from long-term projects. Our theoretical model highlights two potential sources of this distortion: short-termism and the fixed patent term. Our empirical context is cancer research, where clinical trials – and hence, project durations – are shorter for late-stage cancer treatments relative to early-stage treatments or cancer prevention. Using newly constructed data, we document several sources of evidence that together show private research investments are distorted away from long-term projects. The value of life-years at stake appears large. We analyze three potential policy responses: surrogate (non-mortality) clinicaltrial endpoints, targeted R&D subsidies, and patent design.
ER  -