TY - UNPB
T1 - On the Role of Externalities in the Choice of Technology
AU - Colombo, Luca Vittorio Angelo
AU - 32364,
AU - FACOLTA', DI ECONOMIA
AU - finanza, MILANO - Dipartimento di Economia e
PY - 2005
Y1 - 2005
N2 - This paper examines technology adoption problems in a simple general equilibrium framework, characterized by the presence of a firm and a number of self-employed consumer. It is shown that the choice of technologies may be hindered, or even blocked when the firm is price maker on the labor market and price taker on the goods market. Two sources of externality are likely to determine inefficient technology choices and thus inefficiencies of market allocations. First, the firm's technology choice generates a positive externality on the production function of self employed workers. Second, this positive externality induces an increase in labor costs, hence implying a negative pecuniary externality on the firm.
Pareto efficient allocations that would be generated by a social planner internalizing all sources of externalities are discussed, and different mechanisms of policy intervention in order to overcome (or mitigate) market failure are studied, ranging from non linear (first best) subsidization to Pigouvian (second best) subsidies/taxes on labor input and technology adoption.
AB - This paper examines technology adoption problems in a simple general equilibrium framework, characterized by the presence of a firm and a number of self-employed consumer. It is shown that the choice of technologies may be hindered, or even blocked when the firm is price maker on the labor market and price taker on the goods market. Two sources of externality are likely to determine inefficient technology choices and thus inefficiencies of market allocations. First, the firm's technology choice generates a positive externality on the production function of self employed workers. Second, this positive externality induces an increase in labor costs, hence implying a negative pecuniary externality on the firm.
Pareto efficient allocations that would be generated by a social planner internalizing all sources of externalities are discussed, and different mechanisms of policy intervention in order to overcome (or mitigate) market failure are studied, ranging from non linear (first best) subsidization to Pigouvian (second best) subsidies/taxes on labor input and technology adoption.
KW - Efficiency Wages
KW - Market Failure
KW - Pareto Efficiency
KW - Pigouvian Subsidies
KW - Production Externalities
KW - Technology Adoption
KW - Efficiency Wages
KW - Market Failure
KW - Pareto Efficiency
KW - Pigouvian Subsidies
KW - Production Externalities
KW - Technology Adoption
UR - http://hdl.handle.net/10807/25675
M3 - Working paper
BT - On the Role of Externalities in the Choice of Technology
ER -