Heterogeneous Returns to Medical Innovations

This paper sets up a quasi-experiment to estimate the impact of medical innovations on the economic outcomes for the individual and their family based on the rich administrative data for Sweden covering 1 million persons. I find that an increase in medical innovations by one standard deviation raises family income by 15%. Medical innovations strongly influence not only own disposable and labour income and welfare payments but also a spouse’s income. I also find that the economic effects are heterogeneous in relation to the insurance eligibility of the health shock. Results also suggest decreasing yet always positive returns to scale.