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Implications of More Precise Information for Technological Development and Welfare
Author:
Mr. Bernhard Eckwert null

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Mr. Burkhard Drees
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Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 095
Language:
English
Publication Date:
01 Apr 2007
DOI:
https://doi.org/10.5089/9781451866599.001
ISBN:
9781451866599
ISSN:
1018-5941
Pages:
23
Keywords:
WP
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund