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Private and Social Returns to R&D: Drug Development and Demographics (WP-21-30)

Efraim Benmelech, Janice Eberly, Joshua Krieger, and Dimitris Papanikolaou

Investment in intangible capital—in particular, research and development—increased dramatically since the 1990s. However, productivity growth remains sluggish in recent years. One potential reason is that a significant share of the increase in intangible investment is geared toward consumer products such as pharmaceutical drugs with limited spillovers to productivity. The researchers document that a significant share of R&D spending in the U.S. is done by pharmaceutical firms and is geared to developing drugs for the older patients. Increased life expectancy and quality of life among the elderly increases welfare but may not be reflected in estimates of total factor productivity.

Efraim Benmelech, Harold L. Stuart Professor of Finance, Northwestern University

Janice Eberly,  Senior Associate Dean for Strategy and Academics, James R. and Helen D. Russell Professor of Finance, and IPR Associate, Northwestern University

Joshua Krieger, Assistant Professor of Business Administration, Harvard Business School

Dimitris Papanikolaou, John L. & Helen Kellogg Professor of Finance, Northwestern University

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