Big Push in Distorted Economies

Francisco Buera, Hugo Hopenhayn, Yongseok Shin and Nicholas Trachter

No 15910, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Why don't poor countries adopt more productive technologies? Is there a role for policies that coordinate technology adoption? To answer these questions, we develop a quantitative model that features complementarity in firms' technology adoption decisions: The gains from adoption are larger when more firms adopt. When this complementarity is strong, multiple equilibria and hence coordination failures are possible. More important, even without equilibrium multiplicity, the model elements responsible for the complementarity can substantially amplify the effect of distortions and policies. In what we call the Big Push region, the impact of idiosyncratic distortions is over three times larger than in models without such complementarity. This amplification enables our model to nearly fully account for the income gap between India and the US without coordination failures playing a role.

Keywords: Technology adoption; Big push; Complementarities; Industrial policy (search for similar items in EconPapers)
JEL-codes: L11 L16 O14 O25 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-cwa and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Big Push in Distorted Economies (2021)
Working Paper: Big Push in Distorted Economies (2021)
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