Information, Coordination, and the Industrialization of Countries

26 Pages Posted: 23 Mar 2006

See all articles by Florian Englmaier

Florian Englmaier

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics

Markus Reisinger

Frankfurt School of Finance & Management - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: February 2006

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.

Keywords: information, coordination, industrialization, development, global games, equilibrium refinements, big push

JEL Classification: C72, C79, D82, F21, O12, O14

Suggested Citation

Englmaier, Florian and Reisinger, Markus, Information, Coordination, and the Industrialization of Countries (February 2006). CESifo Working Paper Series No. 1670, Available at SSRN: https://ssrn.com/abstract=892731 or http://dx.doi.org/10.2139/ssrn.892731

Florian Englmaier (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28 III/ VG
D-80539 Munich
Germany

Markus Reisinger

Frankfurt School of Finance & Management - Economics Department ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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