Industrialization and the Big Push
This paper explores Rosenstein-Rodman's (1943) idea that simultaneous industrialization of many sectors of the economy can be profitable for all of them, even when no sector can break even industrializing alone. We analyze this ides in the context of an imperfectly competitive economy with aggregate demand spillovers, and interpret the big push into industrialization as a move from a bad to a good equilibrium. We show that for two equilibria to exist, it must be the case that an industrializing firm raises the demand for products of other sectors through channels other than the contribution of its own profits to demand. For example, a firm paying high factory wages raises demand in other manufacturing sectors even if it loses money. In a similar vein, a firm investing today in order to produce at low cost tomorrow shifts income and hence demand for other goods into the future and so makes it more attractive for other firms also to invest today. Finally, an investing firm can benefit firms in other sectors if it uses a railroad or other shared infrastructure, and hence helps to defray the fixed cost of building the railroad. All these transmission mechanisms that help generate the big push seem to be of some relevance for less developed countries.
|Date of creation:||Sep 1988|
|Publication status:||published as "Industrialization and the Big Push" Journal of Political Economy, October, 1989, Vol. 97, no. 5|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Romer, Paul M, 1986.
"Increasing Returns and Long-run Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 94(5), pages 1002-1037, October.
- Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
- Shleifer, Andrei & Vishny, Robert W, 1988. "The Efficiency of Investment in the Presence of Aggregate Demand Spillovers," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1221-1231, December.
- Andrei Shleifer & Robert W. Vishny, 1987. "The Efficiency of Investment in the Presence of Aggregate Demand Spillovers," NBER Working Papers 2297, National Bureau of Economic Research, Inc.
- Shleifer, Andrei & Vishny, Robert W., 1988. "The Efficiency of Investment in the Presence of Aggregate Demand Spillovers," Scholarly Articles 3725553, Harvard University Department of Economics.
- Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
- Oliver Hart, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, Oxford University Press, vol. 97(1), pages 109-138.
- Shleifer, Andrei, 1986. "Implementation Cycles," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1163-1190, December.
- Shleifer, Andrei, 1986. "Implementation Cycles," Scholarly Articles 3451303, Harvard University Department of Economics.
- Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 537-564.
- Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
- Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2708. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.