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Endogenous Technology Choice and the Big Push

Listed author(s):
  • Nico A. Hansen
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    We present a general equilibrium model of imperfect competition to analyze Rosenstein-Rodan's idea of the 'Big Push'. Simultaneous investment of many sectors of the economy can be profitable for everyone although no sector can break even industrializing alone. The mechanism that generates such multiple macroeconomic equilibria is a demand spillover that influences how factor saving the chosen production technologies are. Contrary to the existing 'Big Push' literature, we show that pure profit spillovers can cause multiple equilibria. Equilibria with modern technologies are preferable to others. Adoption of highly productive technologies may be the only way to get out of a 'bad' equilibrium. Technology choice crucially depends on the property rights on profits and is shown to be extremely fragile with respect to policy.

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    Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 473.

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    Date of creation: 14 Mar 1995
    Handle: RePEc:bon:bonsfa:473
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    Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany

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