Sustainable Economic and Financial Development Seminar
8 Novembre 2019 12h15-13h30
(INRA - CEEM) will present
Abstract:
Abstract. In this paper, I study the design of least cost technology adoption subsidy schemes when the individuals' decisions are affected by peer e ects and pro-social motivations. I show that pro-social preferences lead to lower individual subsidies whether peer e ects are positive or negative. However, the form of the optimal scheme strongly depends on the type of peer effects. When peer effects are positive pro-social preferences lead to an increase in objective inequality -the di erence between individual material payoffs- while they lead to a decrease in subjective inequality -the difference between individual utility levels. When peer e ects are negative, the optimal subsidy scheme is uniform, that is all the individuals receive the same subsidy. The model delivers insights for the design of a large range of intervention programs supporting the adoption of new technologies, both in contexts where peers have been shown to generate positive e ects (as in the case of malaria prevention technologies and modern agricultural inputs) and in contexts where peers have been shown to generate negative effects (as in the case of deworming pills).