Implications of More Precise Information for Technological Development and Welfare

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...

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Bibliographic Details
Main Author: Eckwert, Bernhard
Other Authors: Drees, Burkhard
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2007
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
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
Physical Description:23 pages
ISBN:9781451866599