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Abstract
This paper investigates the impact of supply- and demand-side policy interventions on firms’ output and innovation. Leveraging a unique dataset on vaccine production and development, we evaluate the effectiveness of a tort reform, a supply-side policy intervention that reduces vaccine manufacturers’ product liability, and a demand-side policy intervention, the expansion of Medicare coverage of select vaccine products. Our difference-in-differences analysis indicates that while both interventions result in significant increases in vaccine production, the impact of the demand-side policy can be 3-6 times greater in magnitude. There is also evidence suggesting that vaccine development responds exclusively to the demand-side policy.
Figure 3: Vaccine Quantity and Price by Treatment and Control Groups
