We examine technology adoption in an economy populated by identical consumers either working as self-employed entrepreneurs, or supplying labor to an industrial sector that consists either of a monopsonistic firm or of several firms competing on wages. Firms are price takers on the goods market and labor is the only input in production besides technology. We show that two sources of non-marketed relations cause inefficient technology choices. Technology adoption exerts a positive externality on workers' outside options, which in turn induces a negative pecuniary externality, increasing the wage levels required to meet workers' participation and incentive compatibility constraints.
Böhm, V., Colombo, L. V. A., Technology Choice with Externalities, <<RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI>>, 2023; (1): 65-93. [doi:10.26350/000518_000110] [https://hdl.handle.net/10807/234790]
Technology Choice with Externalities
Colombo, Luca Vittorio Angelo
Secondo
2023
Abstract
We examine technology adoption in an economy populated by identical consumers either working as self-employed entrepreneurs, or supplying labor to an industrial sector that consists either of a monopsonistic firm or of several firms competing on wages. Firms are price takers on the goods market and labor is the only input in production besides technology. We show that two sources of non-marketed relations cause inefficient technology choices. Technology adoption exerts a positive externality on workers' outside options, which in turn induces a negative pecuniary externality, increasing the wage levels required to meet workers' participation and incentive compatibility constraints.
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