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Article

The Effect of Government Policy on Pharmaceutical Drug Innovation  

Ayman Chit and Paul Grootendorst

Drug companies are profit-maximizing entities, and profit is, by definition, revenue less cost. Here we review the impact of government policies that affect sales revenues earned on newly developed drugs and the impact of policies that affect the cost of drug development. The former policies include intellectual property rights, drug price controls, and the extension of public drug coverage to previously underinsured groups. The latter policies include regulations governing drug safety and efficacy, R&D tax credits, publicly funded basic research, and public funding for open drug discovery consortia. The latter policy, public funding of research consortia that seek to better understand the cellular pathways through which new drugs can ameliorate disease, appears very promising. In particular, a better understanding of human pathophysiology may be able to address the high failure rate of drugs undergoing clinical testing. Policies that expand market size by extending drug insurance to previously underinsured groups also appear to be effective at increasing drug R&D. Expansions of pharmaceutical intellectual property rights seem to be less effective, given the countervailing monopsony power of large public drug plans.

Article

The Contribution of Vocational Education and Training to Innovation and Growth  

Uschi Backes-Gellner and Patrick Lehnert

Despite the common view that innovation requires academically educated workers, some countries that strongly emphasize vocational education and training (VET) in their education systems—such as Switzerland and Germany—are highly competitive internationally in terms of innovation. These countries have dual VET programs, that is, upper-secondary-level apprenticeship programs, that combine about three quarters of workplace training with about one quarter of vocational schooling, and design them in such a way that their graduates (i.e., dual apprenticeship-graduates) play crucial roles in innovation processes. Regular updates of VET curricula incorporate the latest technological developments into these curricula, thereby ensuring that dual apprenticeship-graduates possess up-to-date, high-level skills in their chosen occupation. This process allows these graduates to contribute to innovation in firms. Moreover, these graduates acquire broad sets of technical and soft skills that enhance their job mobility and flexibility. Therefore, conventional wisdom notwithstanding, dual apprenticeship-graduates in such countries not only have broad skill sets that accelerate innovation in firms, but also willingly participate in innovation because of their high flexibility and employability. Moreover, Switzerland and Germany have tertiary-level VET institutions that foster innovation. These are universities of applied sciences (UASs), which teach and conduct applied research, thereby helping build a bridge between different types of knowledge (vocational and academic). UAS students have prior vocational knowledge through their dual apprenticeship and acquire applied research skills from UAS professors who usually have both work experience and a doctoral degree from an academic university. Thus UAS graduates combine sound occupational knowledge with applied research knowledge inspired by input from the academic research frontier and from practical research and development (R & D) in firms. Firms employ UAS graduates with their knowledge combination as an important input for R & D. Consequently, regions with a UAS have higher levels of innovation than regions without one. This effect is particularly strong for regions outside major innovation centers and for regions with larger percentages of smaller firms.

Article

Religiosity and Development  

Jeanet Sinding Bentzen

Economics of religion is the application of economic methods to the study of causes and consequences of religion. Ever since Max Weber set forth his theory of the Protestant ethic, social scientists have compared socioeconomic differences across Protestants and Catholics, Muslims, and Christians, and more recently across different intensities of religiosity. Religiosity refers to an individual’s degree of religious attendance and strength of beliefs. Religiosity rises with a growing demand for religion resulting from adversity and insecurity or a surging supply of religion stemming from increasing numbers of religious organizations, for instance. Religiosity has fallen in some Western countries since the mid-20th century, but has strengthened in several other societies around the world. Religion is a multidimensional concept, and religiosity has multiple impacts on socioeconomic outcomes, depending on the dimension observed. Religion covers public religious activities such as church attendance, which involves exposure to religious doctrines and to fellow believers, potentially strengthening social capital and trust among believers. Religious doctrines teach belief in supernatural beings, but also social views on hard work, refraining from deviant activities, and adherence to traditional norms. These norms and social views are sometimes orthogonal to the general tendency of modernization, and religion may contribute to the rising polarization on social issues regarding abortion, LGBT rights, women, and immigration. These norms and social views are again potentially in conflict with science and innovation, incentivizing some religious authorities to curb scientific progress. Further, religion encompasses private religious activities such as prayer and the particular religious beliefs, which may provide comfort and buffering against stressful events. At the same time, rulers may exploit the existence of belief in higher powers for political purposes. Empirical research supports these predictions. Consequences of higher religiosity include more emphasis on traditional values such as traditional gender norms and attitudes against homosexuality, lower rates of technical education, restrictions on science and democracy, rising polarization and conflict, and lower average incomes. Positive consequences of religiosity include improved health and depression rates, crime reduction, increased happiness, higher prosociality among believers, and consumption and well-being levels that are less sensitive to shocks.