Subsidies to Technology Adoption when Firms'Information is Endogenous

Luca Colombo, Gianluca Femminis and Alessandro Pavan

No def125, DISCE - Working Papers del Dipartimento di Economia e Finanza from Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE)

Abstract: How should firms be incentivized to adopt new technologies when the technical merits and spillovers of such technologies are uncertain? We show that, when information is dispersed but exogenous, eciency can be induced with simple (constant) subsidies. When, instead, firms must also be incentivized to collect information eciently, subsidies must be conditioned on the ex-post profitability of the new technology and, when the cost of information acquisition is unknown to the planner, on the aggregate investment in the new technology. The optimal policy has a Pigou's flavor but accounts for the non-observability of firms' acquisition and usage of information.

Keywords: endogenous information; investment spillovers; optimal policy; welfare. (search for similar items in EconPapers)
JEL-codes: D21 D62 D83 (search for similar items in EconPapers)
Pages: 45
Date: 2023-01
New Economics Papers: this item is included in nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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