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Coordination Failures, Clusters and Microeconomic Interventions

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  • Andrés Rodríguez-Clare

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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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4431.

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Date of creation: Dec 2005
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Handle: RePEc:idb:wpaper:4431

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  1. Imbs, Jean & Wacziarg, Romain, 2000. "Stages of Diversification," CEPR Discussion Papers 2642, C.E.P.R. Discussion Papers.
  2. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  3. 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, number 358.
  4. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February.
  5. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
  6. Sanjaya Lall (QEH), . "Reinventing Industrial Strategy: The Role of Government Policy in Building Industrial Competitiveness," QEH Working Papers qehwps111, Queen Elizabeth House, University of Oxford.
  7. Ricardo Hausmann & Dani Rodrik, 2002. "Economic Development as Self-Discovery," NBER Working Papers 8952, National Bureau of Economic Research, Inc.
  8. Paul Romer, 1991. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  9. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
  10. Blomström, Magnus & Kokko, Ari & Sjöholm, Fredrik, 2002. "Growth & Innovation Policies For a Knowledge Economy. Experiences From Finland, Sweden & Singapore," EIJS Working Paper Series 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, vol. 64(3), pages 445-64, July.
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Cited by:
  1. Huberto M. Ennis, 2005. "Complementariedades y Política Macroeconómica," Department of Economics, Working Papers 054, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
  2. Carluccio, Juan & Fally, Thibault, 2010. "Multinationals, Technological Incompatibilities, and Spillovers," CEPR Discussion Papers 7869, C.E.P.R. Discussion Papers.
  3. Glavan, Bogdan, 2007. "Coordination Failures, Poverty Traps, "Big Push" Policy and Entrepreneurship: A Critical View," MPRA Paper 5757, University Library of Munich, Germany.

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