Implications of More Precise Information for Technological Development and Welfare
April 1, 2007
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Summary
This paper analyzes the dynamic interactions between the precision of information, technological development, and welfare within an overlapping generations model. More precise information about idiosyncratic production shocks has ambiguous effects on technological progress and welfare, which depend critically on the risk sharing capacity of the economy's financial system. For example, we show that with efficient risk sharing more precise information adversely affects the equilibrium risk allocation and creates a negative uncertainty-related welfare effect, at the same time as it accelerates technological progress and increases R&D investment.
Subject: Consumption, Insurance, Overlapping generations models, Sharing economy, Technological innovation
Keywords: WP
Pages:
23
Volume:
2007
DOI:
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Issue:
095
Series:
Working Paper No. 2007/095
Stock No:
WPIEA2007095
ISBN:
9781451866599
ISSN:
1018-5941
