NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Industrialization and the Big Push

Kevin M. Murphy, Andrei Shleifer, Robert W. Vishny

NBER Working Paper No. 2708
Issued in September 1988
NBER Program(s):   EFG

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.

download in pdf format
   (245 K)

email paper

This paper is available as PDF (245 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2708

Published: "Industrialization and the Big Push" Journal of Political Economy, October, 1989, Vol. 97, no. 5

Users who downloaded this paper also downloaded these:
Wu Merger Activities and Stock Market Valuation in China
Krugman w3275 Increasing Returns and Economic Geography
Murphy, Shleifer, and Vishny w2709 Income Distribution, Market Size, and Industrialization
Acemoglu, Johnson, and Robinson w7771 The Colonial Origins of Comparative Development: An Empirical Investigation
Becker, Murphy, and Tamura Human Capital, Fertility, and Economic Growth
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us