TY  - JOUR
AU  - Murphy,Kevin M.
AU  - Shleifer,Andrei
AU  - Vishny,Robert
TI  - Income Distribution, Market Size, and Industrialization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2709
PY  - 1988
Y2  - September 1988
UR  - http://www.nber.org/papers/w2709
L1  - http://www.nber.org/papers/w2709.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  - When world trade is not free and costless, a less developed country can profitably industrialize only if its domestic markets are large enough. In such a country, for increasing returns technologies to break even, sales must be high enough to cover the set-up costs, This paper studies some determinants of the size of the domestic market, and focuses on two conditions conducive to industrialization. First, agriculture or exports must provide the source of autonomous demand for manufactures. Such expansion of autonomous demand usually results from increases in farm productivity or from opening of new export markets. Second, income generated in agriculture or exports must be broadly enough distributed that it materializes as demand for mass-produced domestic goods, and not just for luxuries. We resort to these two determinants of the size of domestic markets to interpret several historical development episodes.
ER  -