History, coordination and optimality: Some policy lessons

Research output: Contribution to journalArticlepeer-review

Abstract

Within a two-sector dynamic framework with external economies in one sector (which give rise to the possibility of multiple equilibria) and convex adjustment costs, this paper provides a welfare ranking of movements towards the two stable equilibria, solves for the optimal speed of industrialization and derives the shape of the social planner's optimal resource allocation path. These results show that one should be cautious in drawing policy implications from static models of coordination failures. Moreover, this paper also argues that a reduction in adjustment costs (e.g. through the provision of public education facilities) is an essential precondition for industrialization when the existing industrial base is thin.

Original languageEnglish (US)
Pages (from-to)185-193
Number of pages9
JournalJournal of International Trade and Economic Development
Volume8
Issue number2
DOIs
StatePublished - Jan 1 1999
Externally publishedYes

Keywords

  • Coordination failures
  • Government policy
  • Industrialization

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development
  • Aerospace Engineering

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