Coordinating development: Can income-based incentive schemes eliminate pareto inferior equilibria?

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Center Discussion Paper ; No. 924

Classification and Topics

• Classification: Wirtschaft ; Planning Models; Planning Policy ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• Subject: Coordination ; public policy ; income taxation ; implementation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bond, Philip ; Pande, Rohini
• Event: Veröffentlichung
• (who): Yale University, Economic Growth Center
• (where): New Haven, CT
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/26967
• Last update: 10.03.2025, 11:45 AM CET