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Market Size in Innovation: Theory and Evidence From the Pharmaceutical Industry
Daron Acemoglu, Joshua Linn 
Oct. 21, 2003
Working paper. Excerpt: This paper investigates the effect of (potential) market size on entry of new drugs and pharmaceutical innovation. Focusing on exogenous changes driven by U.S. demographic trends, we find that a 1 percent increase in the potential market size for a drug category leads to a 4 to 6 percent increase in the number of new drugs in that category.
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