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Coordination Failure, Clusters, and Microeconomic Interventions

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  • Andrés Rodríguez-Clare

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Abstract

This paper discusses coordination failures, their relevance to developing countries, and the circumstances under which they occur, arguing that that clusters can be seen as agglomerations of firms and organizations in related economic activities among which coordination failures are likely to arise. In other words, clusters provide opportunities for microeconomic interventions that promote coordination and collective action to improve productivity. Subsequently presented is a model of a small economy plagued by sector or cluster-specific coordination failures, which demonstrates that policy should foster cooperation in sectors where the economy already shows comparative advantage. In regard to innovation, general policies that aim to increase innovation across the board are likely to be inferior to policies that take a more selective approach by trying to induce the development of innovation clusters in areas of comparative advantage. The paper concludes with suggestions on how an understanding of coordination failures and clusters can form the basis for a set of effective microeconomic interventions for middle-income countries.

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Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2005)
Issue (Month): ()
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Handle: RePEc:col:000425:008660

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Keywords: coordination; developing countries; clusters;

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  1. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, Elsevier, vol. 49(1), pages 3-32, April.
  2. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 63-86, March.
  3. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  4. Sanjaya Lall (QEH), . "Reinventing Industrial Strategy: The Role of Government Policy in Building Industrial Competitiveness," QEH Working Papers, Queen Elizabeth House, University of Oxford qehwps111, Queen Elizabeth House, University of Oxford.
  5. Hausmann, Ricardo & Rodrik, Dani, 2002. "Economic Development as Self-Discovery," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp02-023, Harvard University, John F. Kennedy School of Government.
  6. Marcus Noland & Howard Pack, 2003. "Industrial Policy in an Era of Globalization: Lessons from Asia," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 358, July.
  7. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S71-102, October.
  8. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 389-405, June.
  9. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, Elsevier, vol. 40(1-2), pages 1-22, February.
  10. Blomström, Magnus & Kokko, Ari & Sjöholm, Fredrik, 2002. "Growth & Innovation Policies For a Knowledge Economy. Experiences From Finland, Sweden & Singapore," EIJS Working Paper Series, The European Institute of Japanese Studies 156, The European Institute of Japanese Studies.
  11. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(3), pages 445-64, July.
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Cited by:
  1. Juan Carluccio & Thibault Fally, 2008. "Multinationals, technological incompatibilities and spillovers," PSE Working Papers, HAL halshs-00586040, HAL.
  2. Glavan, Bogdan, 2007. "Coordination Failures, Poverty Traps, "Big Push" Policy and Entrepreneurship: A Critical View," MPRA Paper 5757, University Library of Munich, Germany.
  3. Huberto M. Ennis, 2005. "Complementariedades y Política Macroeconómica," Department of Economics, Working Papers, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata 054, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.

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