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Output Externalities On Total Factor Productivity

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  • Julio Dávila

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

The impact that output has on future total factor productivity —i.e. the dynamic complementarities shown to be empirically relevant in Cooper and Johri (1997)— is not internalized by competitive agents. As a result, the allocation that a planner would choose cannot be reached as a competitive equilibrium outcome (neither for infinitely-lived agents nor for overlapping generations): the market return to savings and wage rate are too low. The planner’s allocation can nonetheless be implemented by a fiscal policy subsidizing as needed the returns to savings and the wage rate. The exact policy differs depending on whether just past investment or total output influences productivity: in the first case only capital returns need to be subsidized, while in the second case labor income needs to be subsidized too. The policy is balanced period-by-period by means of a lump-sum tax.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Julio Dávila, 2017. "Output Externalities On Total Factor Productivity," Post-Print halshs-03096228, HAL.
    • Handle: RePEc:hal:journl:halshs-03096228
    DOI: 10.1017/S1365100515000905
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    Cited by:

    1. Julio Dávila, 2023. "Bequests or education," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 75(4), pages 1039-1069, May.

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