Impact of Trade Policy Uncertainty and Sustainable Development on Medical Innovation for Developed Countries: An Application of DID Approach

Abstract

Covering the period from 1980 through 2020, with an emphasis on COVID-19, this paper analyzes how trade policy uncertainty and sustainable development policies affected investment in medical innovation. In a twofold difference-in-differences (DiD) approach, using autoregressive distributed lag (ARDL), the paper takes account of exogenous and heterogeneous exposure to trade policy uncertainty and trade policy adjustment in developing nations, which limited tariff increases on imported products. Both long- and short-term effects have been analyzed. Beyond patent applications, margin responses, and exports, the study indicates that eliminating tariff uncertainty boosts innovation. Developing countries have had little effect on the long-term ramifications of sectoral innovation patterns, political shifts, and imported technology. A negative response to the innovation shock and a positive response by R&D corroborate bidirectional and unidirectional causality, respectively. They demonstrate a long-term link between medical innovation, trade policy uncertainty, and R&D spending. As regards sustainable development, GDP growth and HDI have positive, and GINI index and CO2 emissions, have negative long-run relations with medical innovation. This study contributes to the literature on innovation and policy uncertainty together with sustainable development factors in developed countries, and especially on innovation trends in the medical sector, where there is a current policy ambiguity regarding the influx of foreign technology and its significance.