UC San Diego

Policies are implemented targeting specific objectives, but there are both intended and unintended consequences that have been studied in applied economics. In my dissertation, I study how firms' production choices interact with policies in various contexts. These choices are especially related to drug affordability, socioeconomic equity, and environmental concerns.Chapter 1 studies the Indian import penetration in the U.S. pharmaceutical industry. After India amended its patent protection law in 2005, Indian pharmaceutical firms increased generic drug exports to Western countries, especially the United States. Drug exports were stronger for drugs that contain active pharmaceutical ingredients, which Indian pharmaceutical firms had manufacturing capabilities for before 2005. These 'treated' drugs experienced a larger price drop and increased competition from Indian firms. Then, I show that non-Indian firms exited the market for 'treated' drugs through more discontinuation and fewer new registrations of 'treated' drugs. This strategic change was stronger when a firm had larger revenue shares exposed to the trade shock. Non-Indian firms chose to keep selling drugs they already had experience producing rather than exploring new active pharmaceutical ingredients. The Indian law change also resulted in foreign supply chain disruptions, with 'treated' drugs facing more frequent shortages in the market. This chapter studies how foreign supply shocks affect competition in the pharmaceutical industry and how trade-driven competition could crowd out incumbent firms. Chapter 2 explores how affirmative action supports minority-led firms in the procurement market. While the previous literature has focused on the utilization of minority-led firms in procurement contracts, this paper examines corporate strategies among female-owned businesses. In the Korean public procurement market, there was a law revision that mandated a quota to contract with 'certified' female firms, i.e., firms confirmed by the government as being owned by female CEO(s). I find that 'certified' female firms participated in and won more bids with two channels involved: the previous contracting relationship between procuring agencies and firms and the information sharing in the network among certified female firms. I also examine if affirmative action resulted in strategic changes among non-targets in a way that male-owned firms changed their ownership to female-owned to be eligible for the preferential policy. Although previously uncertified female-owned firms opted to complete the female certification, I do not find such evidence from male-owned firms. Certified female firms acquired a larger revenue share made from both procurement and private markets. Affirmative action may increase the revenue share of its target outside the policy's realm. Chapter 3 analyzes the composition of innovation and the technology adoption of green inputs in the pesticide industry. By leveraging the announcement of a major expansion of organic food offerings in the one of the largest grocery chains in the U.S in 2006, this chapter studies how a change in the demand for organic food influenced product composition in the market of biopesticides, i.e., non-toxic pesticides approved for organic agriculture. We find suggestive evidence that the organic market expansion and the increase in demand for organic produce resulted in a higher share of newly-registered biopesticides in the pesticide market. However, many of the new biopesticides are generics, indicating a lack of innovative behavior. We also find that farms in California increased biopesticide use and used lower-toxicity pesticides on average. The change in pesticide use is not attributed to the pesticide product choice set but rather an increase in profitability to organic or mixed-use production. This chapter provides implications on how the composition of innovation is shaped by demand-side shocks and factors that affect green technology adoption.