Coordinating Development: Can Income-based Incentive Schemes Eliminate Pareto Inferior Equilibria?

Philip Bond and Rohini Pande

No 28436, Center Discussion Papers from Yale University, Economic Growth Center

Abstract: Individuals' inability to coordinate investment may significantly constrain economic development. In this paper we study a simple investment game characterized by multiple equilibria and ask whether an income-based incentive scheme can uniquely implement the high investment outcome. A general property of this game is the presence of a crossover investment point at which an individual's incomes from investment and non-investment are equal. We show that arbitrarily small errors in the government's knowledge of this crossover point can prevent unique implementation of the high investment outcome. We conclude that informational requirements are likely to severely limit a government's ability to use income-based incentive schemes as a coordination device.

Keywords: International; Development (search for similar items in EconPapers)
Pages: 38
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/28436/files/dp050924.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:yaleeg:28436

DOI: 10.22004/ag.econ.28436

Access Statistics for this paper

More papers in Center Discussion Papers from Yale University, Economic Growth Center Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().