Public Policies in Investment Intensive Industries

IEFE ‐ The Center for Research on Energy and Environmental Economics and Policy Working Paper n. 59

20 Pages Posted: 18 Jan 2014

See all articles by Giovanni Immordino

Giovanni Immordino

University of Salerno - Centre for Studies in Economics and Finance (CSEF)

Michele Polo

Bocconi University - Department of Economics

Date Written: December 17, 2013

Abstract

In this paper we review some recent work on public intervention in economic environments where firms undertake investments in research or in physical assets, and then select appropriate business practices to extract profits from the outcomes of the investment process. Public policies may take different forms: the release of an authorization; the setting of fines and damages for liability; or the choice of legal standards in antitrust law enforcement. The business practices are privately pro…table but may be welfare enhancing or socially harmful. When expectations are optimistic, public policies face a trade-off between ex-ante effects on investment, that suggest hands off, and ex-post control of practices when harmful, that requires intervention. Our general result suggests that public policies should be softer when innovation is an important source of welfare improvements.

Keywords: Regulation, Antitrust, Legal Standards

JEL Classification: D73, K21, K42, L51.

Suggested Citation

Immordino, Giovanni and Polo, Michele, Public Policies in Investment Intensive Industries (December 17, 2013). IEFE ‐ The Center for Research on Energy and Environmental Economics and Policy Working Paper n. 59. Available at SSRN: https://ssrn.com/abstract=2380654 or http://dx.doi.org/10.2139/ssrn.2380654

Giovanni Immordino (Contact Author)

University of Salerno - Centre for Studies in Economics and Finance (CSEF) ( email )

84084 Fisciano, Salerno
Italy

Michele Polo

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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