This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and...

In a general equilibrium product-cycle model, lower trade barriers increase Southern purchasing power, which lifts long-run growth by increasing the profit from innovation. In the short run, factors of production must be reallocated inside firms, which lowers the opportunity cost of innovation,...