Productivity.

• Position: Bureau News - Pharmaceutical industry

The NBER's Program on Productivity met in Cambridge on March 12. The meeting was organized by Ernst R. Berndt, NBER and MIT, and Chad Syverson, NBER and University of Chicago. The following papers were discussed:

Boyan Jovanovic, NBER and New York University, "The Pre-Producers" Discussant: Chad Syverson

Frank R. Lichtenberg, NBER and Columbia University, "Availability of New Drugs and Americans' Ability to Work" Discussant: Ernst R, Berndt

Daron Acemoglu, NBER and MIT, and Joshua Linn, MIT, "Market Size in Innovation: Theory and Evidence from the Pharmaceutical Industry" Discussant: David Popp, NBER and Syracuse University

Lee G. Branstetter, NBER and Columbia University, "Is Academic Science Driving a Surge in Industrial Innovation? Evidence from Patent Citations"

Discussant: James D. Adams, NBER and Rensselaer Polytechnic Institute Ana Aizcorbe, Bureau of Economic Analysis, "Product Innovation, Product Introductions and Intel's Productivity over the 1990s" Discussant: Samuel S. Kortum, NBER and University of Minnesota

Lucy Eldridge and Patricia Getz, Bureau of Labor Statistics, "Alternative Hours Data and Their Impact on Productivity Change" and "Employment from the BLS Household and Payroll Surveys: Summary of Recent Trends" Discussant: Lisa M. Lynch, NBER and Tufts University

While a start-up firm waits for its sales to materialize, it is a "pre-producer." This waiting period represents a special kind of entry cost. Jovanovic studies how such entry costs influence the several stages of an industry's life cycle. Assuming that the production hazard is rising in the initial stages of pre-production, industry equilibrium entails an eventual "shakeout" of pre-producers as they are squeezed out by the producers who drive industry price down. This seems to fit the experience of the early automobile industry and of the recent dot.com wave.

Lichtenberg estimates the average or aggregate effect of new drugs on ability to work--the number of days worked per employed person, and the fraction of the working-age population that is employed--by examining whether chronic conditions for which many new drugs were introduced resulted in greater increases in ability to work than conditions for which few new drugs were introduced, controlling for other factors. He uses data on about 200,000 individuals with 47 major chronic conditions observed throughout a 15-year period (1982-96). Under very conservative assumptions, the estimates indicate that the value...