Information , Coordination , and the Industrialisation of Countries ∗

The industrialisation process of a country is often plagued by a failure to coordinate firms’ 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 argue that subsidies may be a property of a signalling equilibrium to overcome credibility problems in information provision. We point at possible problems with overreaction to public information and sequencing of the industrialisation process. Furthermore we suggest a new focus for development policy. JEL classification: C 72, C 79, D 82, F 21, O 12, O 14