Heterogeneous Entrepreneurs, Government Quality and Optimal Industrial Policy

Michele Di Maio, Giorgio Fabbri and Vincenzo Lombardo

No 1622, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper presents a theoretical model exploring the effects of industrial policy (IP) when entrepreneurs are characterized by different ability levels and sectors are heterogeneous as for their profitability and social externalities generated. The optimal structure of IP in terms of monetary transfers is shown to crucially depend on the distribution of entrepreneurs abilities. Moreover, we find that IP increases aggregate welfare under very general conditions, also in the presence of Government failures. In an extension of the model, we consider the case in which the Government can use also the provision of business training to entrepreneurs as an additional instrument of IP. Based on these results, policy implication for industrial policy in developing countries are discussed.

Keywords: Entrepreneurs; Heterogeneous Abilities; Training. (search for similar items in EconPapers)
JEL-codes: O14 O15 O25 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2016-06-30
New Economics Papers: this item is included in nep-ent and nep-ger
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Heterogeneous Entrepreneurs, Government Quality and Optimal Industrial Policy (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1622

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