Kristina M. Lybecker

Compulsory Licensing in Canada and Thailand: Comparing Regimes to Ensure Legitimate Use of the WTO Rules

This paper examines two recent examples of compulsory licensing legislation: one globally embraced regime and one internationally controversial regime operating under the same WTO rules. In particular, we consider Canadian legislation and the use of compulsory licensing for HIV/AIDS drugs destined for a developing country. This is then contrasted with the conditions under which Thai authorities are pursuing compulsory licenses, the outcomes of their compulsory licenses, as well as the likely impact of the Thai policy. Finally, we construct a rubric to evaluate characteristics of a successful regime. This is used to analyze the Canadian and Thai regimes and frame the expected implications of each national policy. It is hoped that the assessment will guide changes to compulsory licensing design to ensure that legitimate regimes are embraced while illegitimate ones are disallowed.

Determinants of Recent Online Purchasing and the Percentage of Income Spent Online

The recent stagnation of electronic commerce highlights the need to understand contemporary online consumer behavior. This study incorporates current user demographics and emerging Internet activities to dynamically model the determinants of two key measurements of recent online shopping, a purchase within the last year and the novel dependent variable, percentage of income spent online in the last three months. Logistic regression is applied to a nationally representative 2007 survey of the U.S. online population. Determinants of a recent online purchase include, ownership of a credit card, an online payment account (PayPalTM), listening to podcasts, participating in online auctions, and for the first time, female gender. In a second regression, positive determinants for the percentage of income spent online include male gender, educational attainment, online auctions, instant messenging and online dating. Online spending increases with time online and appears to compete with other forms of online entertainment and social networking. Stratification of the data by gender yields higher estimates for the explained variance in the percentage of income spent online for men than for women. Males are novelty shoppers, and online purchasing competes with watching television, playing games online and blogging. They strongly prefer products perceived as new and innovative and are not motivated by value. Further stratification by income and age reveals that possession of an online deferred account is the strongest determinant for all men except the highest earners. In contrast, women are convenience-oriented but not novelty or value shoppers. High-spending women are technologically sophisticated, using the Internet to obtain stock quotes, participate in online auctions and make deferred payments. These results produce snapshots of contemporary online shoppers that can be used by electronic retailers to determine which product characteristics to highlight for greatest impact, and to efficiently target specific activities, such as entertainment, podcast and social network websites, to develop new and robust marketing platforms.

The Effect of the Nonprofit Motive on Hospital Competitive Behavior

Abstract In this paper, we employ three simple theoretical models of nonprofit hospitals to investigate equilibrium behavior when hospitals compete. Utilizing a differentiated Bertrand model, we examine how prices, quantity of patients served, service to the uninsured, and quality of care are affected as nonprofits place more weight on profit maximization. We find that the specification of the nonprofit motive greatly impacts the results. When the nonprofit motive is maximizing output, prices rise for both hospitals as the nonprofit moves away from its nonprofit motive. However, if the nonprofit cares about serving the uninsured, prices in the market fall. Finally, when hospitals compete on price and quality, more emphasis on profits results in an increase in price at the for-profit hospital and a decrease in price at the nonprofit hospital. These results suggest that the importance of the nonprofit motive has been underestimated and should be further investigated.

Challenges to Technology Transfer: A Literature Review of the Constraints on Environmental Technology Dissemination

This paper considers the challenges to the dissemination of environmental innovation. Following a brief exploration of the legal and regulatory regimes surrounding environmental technologies, the paper examines diffusion mechanisms, market factors, social characteristics and political elements that facilitate and complicate dissemination. Given the importance of innovation to economic development and growth, the diffusion of innovation is of great interest to economists and policymakers alike. Key Findings: • Many of the challenges to innovation and the dissemination of technology in general are found in the field of eco-innovation. The three principal problems to be considered are: asymmetric information, market power, and externalities. In addition, uncertainty regarding the qualities of the innovation as well as future prices of inputs will complicate the adoption process. • The rate of diffusion is dependent on the cost-effectiveness of the new technology. Given this, the firms with the greatest potential profits associated with the innovation will be the first adopters. In addition, new technologies are often capital intensive and associated with size and scale economies, requiring access to investment capital. • Numerous studies find that the incentives to adopt new innovations are greater with market-based tools than with regulatory tools. In an international context, uncertainty and informational problems are exacerbated and contracting solutions are even more difficult to achieve. • New technologies frequently challenge existing legal systems in new ways and foster the evolution of the law. However, innovative industries would benefit from greater predictability in the legal realm. This is particularly important since the scope of patent protection, as well as the incomplete enforcement of IP rights, mean that the effective strength of intellectual property rights are determined by the implementation of the legal system.• Market forces and incentives may facilitate the dissemination of environmental innovations or create insurmountable barriers to adoption. In this context, it is important to be aware of the lessons learned about innovation: innovation responds quickly to incentives; innovation in a given field experiences diminishing returns over time; the social returns to environmental research are high; and the type of policy used affects the nature of new innovations. • Green technology is characterized by two market failures, the public goods nature of knowledge and environmental externalities. • While developing nations frequently claim that strong intellectual property rights on carbon abatement technologies hinder developing countries’ greenhouse gas abatement efforts, it has been shown that IPRs do not constitute as significant a barrier as claimed since a variety of technologies exist for reducing emissions. In many cases, IPR protected technologies are not necessarily more costly than those not covered. • There are a number of characteristics and circumstances of developing nations that hinder innovation: a lack of scientists and researchers, brain drain, small market size, the lack of infrastructure, importantly telecommunications infrastructure, the quality the business environment and governance conditions, bureaucratic climate and the formal/informal regulations regarding economic transactions, cash-strapped governments and inability to make public investments in research and infrastructure. • Environmental issues are frequently local or regional in nature, so local knowledge and solutions are required. Further, many technologies are highly ecology-specific and while appropriate in one setting may be difficult to employ in another. • Adoption is facilitated by environmental feasibility as well as cultural and political acceptance. Firms that effectively respond to such pressure and signals are more apt to succeed. It is important to note that consumer perceptions of eco-friendly are unclear, and often hinder diffusion and pricing• It is critical that technology recipients have the prerequisite knowledge and scientific base to best exploit the information. This includes domestic private and public research laboratories and universities, in addition to a sound basis of technical skills and human capital. Each of these help to reduce the costs of imitation, adaption, and follow-on innovation. The greater the ‘technological distance’ of a recipient country from the global frontier, the greater the challenge of effectively incorporating information into production systems. • Technology transfer is enhanced by stronger levels of patent protection, while acknowledging the necessity of complementary factors such as infrastructure, effective government policies and regulations, knowledge institutions, access to credit and venture capital, skilled human capital, and networks for research collaboration. Economic studies have found that while IP protection facilitates trade flows of patented goods into large and middle-income nations, but has no impact on poor countries. • Like many new technologies, environmental innovations may require significant on-going support, training and assistance with maintenance. It is essential to consider the skills required for continued use and repair of new technologies at the onset of adoption. This paper reveals that it is a combination of market, regulatory and cultural conditions that contribute to the arena in which dissemination and adoption of environmental technologies take place. Fundamentally for technology transfer to take place in developing nations a number of obstacles must be overcome: uncertainty surrounding the costs and benefits of adoption, asymmetric information on the value of the innovation, financial and skill requirements, externalities, and regulatory barriers. While scholars are still exploring why, where and how adoption takes place, lessons learned indicate that policymakers should seek to reduce uncertainty and foster transparency as they pursue dissemination to developing nations.

Funding pharmaceutical innovation through direct tax credits

Rising pharmaceutical prices, increasing demand for more effective innovative drugs and growing public outrage have heightened criticism of the pharmaceutical industry. The public debate has focused on drug prices and access. As a consequence, the patent system is being reexamined as an efficient mechanism for encouraging pharmaceutical innovation and drug development. We propose an alternative to the existing patent system, instead rewarding the innovating firm with direct tax credits in exchange for marginal cost pricing. This concept is based on the fundamental assumption that innovation that benefits society at large may be financed publicly. As an industry which produces a social good characterized by high fixed costs, high information and regulatory costs, and relatively low marginal costs of production, pharmaceuticals are well-suited to such a mechanism. Under this proposal, drug prices fall, consumer surplus increases, access is enhanced, and the incentives to innovate are preserved.

Innovating for an Uncertain Market: A Literature Review of the Constraints on Environmental Innovation

This paper aims to summarize the state of academic knowledge surrounding the economics of environmental innovation. Following a definition of environmental technology, the paper enumerates and describes the obstacles or constraints to the development of eco-innovation. Key Findings: • Many of the challenges to innovation in general are mirrored and exaggerated in eco-innovation. • Environmental innovation is fraught with uncertainty: uncertainty about the end-product of a research process, uncertainty about the reception by the market, uncertainty about the ability to appropriate the returns to research while competitors try to produce similar results, and uncertainty about regulatory impacts on the research process and end-result. In addition, there is frequently uncertainty surrounding the pricing of competing as well as complementary goods. • On the other hand, uncertainty itself often stimulates innovation. Policymakers may very well be conflicted about how much structure to provide for innovators, if they truly thrive on some degree of uncertainty. This is further complicated by the fact that the appropriate policy response undoubtedly differs by industry, by technological problem, and even by time period. • This review of economic studies reveals five themes which affect the development of eco-innovations: intellectual property rights (e.g. patents), economies of scale, markets and incentives, system complexity and policy choices. • While developing nations frequently claim that strong intellectual property rights on carbon abatement technologies hinder developing countries’ greenhouse gas abatement efforts, it has been shown that IPRs do not constitute as significant a barrier as claimed since a variety of technologies exist for reducing emissions. In many cases, IPR-protected technologies are not necessarily more costly than those not covered. • Numerous studies have documented the reasons to encourage strong patent law. There is near universal agreement among economists that strong intellectual property rights are an essential prerequisite to the development of environmental technologies. Moreover, most firms indicate that IPRs are essential to the profitability of commercial research, so in its absence they simply will not commit research and development (R&D) funding to the market in question. At the same time, the value of patents, and other forms of protection, varies across industries and across innovations. • One of the challenges of sequential innovation lies in the difficulty in rewarding early innovators for the technological foundations they develop, while also allowing for the reward of subsequent innovators who improve and extend the original technology to new applications. This is particularly applicable in the context of new technologies, such as environmental technologies. • The challenge of achieving efficient scale and reducing per-unit production costs is critical to the success of most innovative products and processes. Since most innovations are subject to economies of scale (or increasing returns to scale), in which higher levels of output are associated with lower per-unit costs, larger firms may be better positioned to develop environmental technologies. • The greater the ease of development and extent to which the innovator will profit from the innovation and appropriate the benefits will both facilitate environmental innovation. However, in the case of eco-innovation, there is uncertainty about actual costs, consumer values, and policy platforms now and in the future. Moreover, the market is complicated by competing technologies (e.g.: fossil fuels) subject to negative externalities in which the user does not bear the full cost of the good. Further, the public goods nature of environmental technology prevents the user (and the innovator) from fully capturing the benefits of the innovation. • The role of federal regulations is critical to the development of eco-innovation. Environmental regulation might lead to cost-saving innovation if a) the fixed costs of innovation are lower than compliance plus production, or b) spillover effects make innovation strategically a bad idea for the firm but a good idea for society, or c) regulation helps to fix incentive problems between managers and owners, or d) regulation helps to clear information flow. • Given that knowledge has positive spillovers, benefits to those who bore none of the cost of acquisition, economists conclude that the amount of R&D provided by private markets will be lower than the socially optimal level. As such, questions emerge as to whether the returns to R&D are sufficient to encourage eco-innovation. • There is an important role for policy in the support or stifling of eco-innovation. Five themes emerge from the papers reviewed. First, there is a clear portfolio of policy alternatives to stimulate innovation or energy-related investment including taxes, subsidies, permits and standards/regulations. Second, there is strong evidence that regulatory policies can be very effective. Third, policy may serve to create a market for previously uncertain or ill-defined environmental commodities. Fourth, current policymakers are frequently unable to muster the political will to enact legislation that is pro-environmental innovation. Fifth, heterogeneity may be a desirable attribute in policy since many environmental issues are local or regional in nature, and thus require local knowledge and solutions. • Across numerous studies there are five themes which resonate with all economists as challenges to eco-innovation: intellectual property rights, economies of scale, markets and incentives, complex systems, and policy. The greatest potential for propelling innovation is usually found in market forces and incentives. Uncertainty, externalities, and subsidies to competing goods undoubtedly hinder the process, but the motivation provided by potential profit is undeniable. However, due to the spillovers associated with eco-innovation and the public goods nature of these technologies, there is a role for government intervention in order to spur an increase in environmental innovation. In this context it is essential for policymakers to find a balance: encouraging competition while guaranteeing a large market for minimum economic scale, reducing uncertainty about future resource prices while keeping alternatives open, offering rights of exclusion to intellectual property holders while not curtailing the ability of sequential innovators to build upon past successes, promoting social goals while respecting market pressures.

Buy Here, or Keep Driving? The Effect of Geographic Market Density on Retail Gas Prices

This paper examines whether the presence of local competitors affects the retail price of gasoline in mid-sized American cities. Spatial regression analysis permits an answer that is clear of potentially confounding statistical problems. Results continue to show small impacts of local competition, especially compared to other factors.

The Role of Restrictive Abortion Legislation in Explaining Variation in Oral Contraceptive Use

Following the legalization of abortion in the United States, scholars have studied its impact on a wide variety of factors including women’s educational choices and labor force decisions, abortion rates, and most controversially, crime. Economists have also investigated the determinants of state abortion restrictions, exploring the importance of demographic characteristics, locational availability, and the strength of advocacy groups. Notably absent from the existing literature is an examination of the impact of legalized abortion and the restrictions of its use on the decision to use oral contraceptives. Earlier work established that states with more lenient laws regarding access to contraceptive services by minors have greater pill use, but the impact of the legal framework surrounding abortion restrictions remains unexamined. Using a linear regression model to analyze three cycles of the National Survey on Family Growth (NSFG) data we analyze the possibility that variation in state abortion availability, proxied by legislation restricting a woman’s reproductive rights, may generate variation in the use of birth control pills. It is reasonable to expect that without the option of terminating a pregnancy (or in states where the cost of doing so is higher), that oral contraceptives would be more widely utilized. Our findings reveal that restrictions on abortion funding have a significant and positive impact on a woman’s decision to use the pill. These results indicate that women are forward thinking when making their contraceptive decisions, at least relative to abortion legislation, which suggests that there are important policy implications for increasing health outcomes.

Sure, but Who has the Energy? The Importance of Location for Knowledge Transfer in the Energy Sector

Using over 250,000 U.S. patent citations, we test whether knowledge transfers in the energy sector are sensitive to distance, and whether that sensitivity has changed over time. Controlling for self-citation by inventor, assignee and examiner, multivariate regression analysis shows that physical distance is becoming less important for spillovers with time.

Do Restrictions Beget Responsibility? The Case of U.S. Abortion Legislation

Over the past decade, more than 25 U.S. states enacted legislation surrounding abortions. By analyzing state abortion legislation and proxying how the cost of obtaining an abortion varies across states, this study assesses the implications of legislative changes on women’s contraceptive choices. Examining women by race/ethnicity, income, age, and religious affiliation, the results show that women respond to increased restrictions on abortion availability and cost but that the effects are very small. This study demonstrates that legislation restricting women’s access to abortions fails to promote greater use of more effective contraceptive methods, increasing the likelihood of unwanted births and illegal abortion procedures. JEL Classifications: D1, D81, I18, J13