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Information, Coordination and the Industrialization of Countries

  • Florian Englmaier
  • Markus Reisinger

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) Copyright , Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/cesifo/ifn006
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Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 54 (2008)
Issue (Month): 3 (September)
Pages: 534-550

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Handle: RePEc:oup:cesifo:v:54:y:2008:i:3:p:534-550
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  1. Ciccone, A. & Matsuyama, K., 1993. "Start-Up Costs and Pecuniary Externalities as Barriers to Economic Development," Papers 533, Stockholm - International Economic Studies.
  2. Graham, Bryan S. & Jonathan Temple, 2002. "Rich Nations, Poor Nations: How much can multiple equilibria explain?," Royal Economic Society Annual Conference 2002 91, Royal Economic Society.
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  7. Karayalcin, Cem & Mitra, Devashish, 1999. "Multiple equilibria, coordination, and transitional growth," Journal of Development Economics, Elsevier, vol. 60(2), pages 297-316, December.
  8. Giancarlo Corsetti & Amil Dasgupta & Stephen Morris & Hyun Song Shin, 2004. "Does One Soros Make a Difference? A Theory of Currency Crises with Large and Small Traders," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 87-113, 01.
  9. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
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  15. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  16. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  17. Trindade, Vitor, 2005. "The big push, industrialization and international trade: The role of exports," Journal of Development Economics, Elsevier, vol. 78(1), pages 22-48, October.
  18. Heinemann, Frank & Illing, Gerhard, 2002. "Speculative attacks: unique equilibrium and transparency," Journal of International Economics, Elsevier, vol. 58(2), pages 429-450, December.
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