Information, Coordination and the Industrialization of Countries
Posted: 1 Sep 2008
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Information, Coordination, and the Industrialization of Countries
Date Written: September 2008
Abstract
The industrialization process of a country is often plagued by a failure to coordinate investment decisions. Using the Global Games approach we can solve this coordination problem and eliminate the problem of multiple equilibria. We show how appropriate information provision enhances efficiency. We discuss extensions of the model and argue that subsidies may be a property of a signalling equilibrium to overcome credibility problems in information provision. In addition, we point out possible problems with overreaction to public information. Furthermore, we suggest a new focus for development policy. (JEL codes: C72, C79, D82, F21, O12, O14)
Keywords: Information, coordination, industrialization, development, Global Games, equilibrium refinements, big push
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