Learning about Oneself: Technology Financing in a Tamil Fishing
AbstractWe study adoption of a costly new technology when the profitability of the new technique differs over individuals and there is uncertainty about these individual-specific differences. We establish that such individual-specific uncertainty results in a financing constraint when debt contracts are characterized by limited liability and limited commitment on the side of the borrower. In data from a Tamil coastal village, in which a new fishing boat became available in 2001, we find significant evidence for individual-specific uncertainty about the profitability of the new technology. Results suggest that this uncertainty reduces the amount of external finance available for the technology switch by 20 percent. The resulting need for complementary self-finance creates a wealth threshold, below which adoption, even if profitable, is not feasible. Kuznets-type inequality dynamics result on the middle run.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 524.
Date of creation: 03 Dec 2006
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Learning; Competition; Credit Constraints;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-CBE-2007-01-13 (Cognitive & Behavioural Economics)
- NEP-DEV-2007-01-13 (Development)
- NEP-INO-2007-01-13 (Innovation)
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