TY - JOUR AU - Murphy,Kevin M. AU - Shleifer,Andrei AU - Vishny,Robert W. TI - Industrialization and the Big Push JF - National Bureau of Economic Research Working Paper Series VL - No. 2708 PY - 1988 Y2 - September 1988 UR - http://www.nber.org/papers/w2708 L1 - http://www.nber.org/papers/w2708.pdf N1 - Author contact info: Kevin M. Murphy Booth School of Business The University of Chicago 5807 S. Woodlawn Ave. Chicago, IL 60637 Tel: 773/702-7280 Fax: 773/834-3554 E-Mail: murphy@chicagoBooth.edu Andrei Shleifer Department of Economics Harvard University Littauer Center M-9 Cambridge, MA 02138 Tel: 617/495-5046 Fax: 617/496-1708 E-Mail: ashleifer@harvard.edu Robert W. Vishny Booth School of Business The University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/702-2522 Fax: 773/834-1920 E-Mail: Rvishny@gmail.com AB - 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. ER -