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Coordination Failures and Government Policy: Evidence From Emerging Countries

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  • Stephen Ferris
  • Kishore Gawande

Abstract

Rodrik [JIE 1996] argues for coordinated government policy when emerging countries are stuck in a low wage equilibrium because of a coordination failure. Because the return to intermediate output is markedly below that realised when a minimum threshold number of varieties must produced in concert, the expectation of too few varieties is sufficient to discourage entry and keep a high tech sector from succeeding. Here we search for evidence consist with such threshold models on cross country data. First production data is used to ask (i) whether evidence of coordination failures among intermediate good producers is associated with a low wage equilibrium and (ii) whether government policy can succeed in moving an emerging country from a low to high wage equilibrium. Second, financial data is used to ask whether there is evidence that government coordination can replace missing private markets in emerging economies and whether a moderate degree of financial repression can help rather than hinder growth.

Suggested Citation

  • Stephen Ferris & Kishore Gawande, 2003. "Coordination Failures and Government Policy: Evidence From Emerging Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 84-111.
  • Handle: RePEc:taf:jdevst:v:39:y:2003:i:4:p:84-111
    DOI: 10.1080/713869427
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    Cited by:

    1. Pazhanisamy, R., 2020. "Asymmetric Information and Global Market Failure: Evidence and Policy Implications from Covid-19," EconStor Research Reports 228512, ZBW - Leibniz Information Centre for Economics.

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