In: Economics
The Big Push model illustrates alternative cases where the economy can reach equilibrium with a higher level of total output with coordinated efforts by modern firms and cases where such an outcome is impossible despite such efforts. Explain with a graph only the case where there exists a possibility of a coordination failure.
Suppose that a developing country devotes extensive resources towards improving the education and skill level of the labor force. How might this help the economy avoid a coordination failure? Is this strategy likely to be successful? Why or why not?