Economic implications of better information in a dynamic framework

Bernhard Eckwert () and Itzhak Zilcha

Economic Theory, 2004, vol. 24, issue 3, 581 pages

Abstract: We consider an OLG model with accumulation in human capital and analyze the economic implications of information about individual skills. Agents in each period differ by the random innate ability assigned to each individual. When young, all agents are screened for their abilities and this screening process (signal) constitutes a public information which is used in choosing the level of private investment in education. We demonstrate that in the presence of risk sharing markets better information may be harmful for all in equilibrium, and find conditions under which better information either enhances growth or reduces growth. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Information system; Human capital accumulation; Risk sharing markets. (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00199-004-0503-7

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