The
financial secretaries expertise in monitoring investment proposals may
increase with the accumulated experience in funding such projects. In
the other direction, the productivity gains from learning lower the cost
of venture capital finance and reinforce start-up investment. Since
learning depends on aggregate investment, the effect is external to
individual agents. The paper demonstrates how the nature of the
externality depends on the state of financial sector development, and
how the appropriate tax/subsidy policy should be tailored to it.