Public data, economic growth, and social welfare

Abstract

We develop a semi-endogenous growth model in which firms freely use public data, generating a feedback from public spending to data, output, and fiscal capacity. In the decentralized equilibrium, firms are oversized and product variety insufficient, even when the government supplies data optimally. We derive implementable policies that decentralize the planner’s allocation: an optimal tax to finance public goods and data, and an entry subsidy that lowers barriers. Quantitative exercises corroborate the theory and quantify the contribution of public data.