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Title

History and coordination failure

AuthorsAdserà, A.; Ray, Debraj
Issue Date1998
PublisherSpringer
CitationJournal of Economic Growth 3(3): 267-276 (1998)
AbstractAn extensive literature discusses the existence of a virtuous circle of expectations that might lead communities to Pareto-superior states among multiple potential equilibria. It is generally accepted that such multiplicity stems fundamentally from the presence of positive agglomeration externalities. We examine a two-sector model in this class and look for intertemporal perfect foresight equilibria. It turns out that under some plausible conditions, positive externalities must coexist with external diseconomies elsewhere in the model, for there to exist equilibria that break free of historical initial conditions. Our main distinguishing assumption is that the positive agglomeration externalities appear with a time lag (that can be made vanishingly small). Then, in the absence of external diseconomies elsewhere, the long-run behaviour of the economy resembles that predicted by myopic adjustment. This finding is independent of the degree of forward-looking behavior exhibited by the agents. © 1998 Kluwer Academic Publishers.
URIhttp://hdl.handle.net/10261/57809
DOIhttp://dx.doi.org/10.1023/A:1009718905841
Identifiersdoi: 10.1023/A:1009718905841
issn: 1381-4338
e-issn: 1573-7020
Appears in Collections:(IAE) Artículos
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