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Industrialisation and the big push in a global economy

Udo Kreickemeier () and Jens Wrona

No 249, DICE Discussion Papers from University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: In their famous paper on the "Big Push", Murphy, Shleifer, and Vishny (1989) show how the combination of increasing returns to scale at the firm level and pecuniary externalities can give rise to a poverty trap, thereby formalising an old idea due to Rosenstein-Rodan (1943). We develop in this paper an oligopoly model of the Big Push that is very close in spirit to the Murphy-Shleifer-Vishny (MSV) model, but in contrast to the MSV model it is easily extended to the case of an economy that is open to international trade. Having a workable open-economy framework allows us to address the question whether globalisation makes it easier or harder for a country to escape from a poverty trap. Our model gives a definite answer to this question: Globalisation makes it harder to escape from a poverty trap since the adoption of the modern technology at the firm level is impeded by tougher competition in the open economy.

Keywords: Poverty Traps; Multiple Equilibria; International Trade; Technology Upgrading; General Oligopolistic Equilibrium (search for similar items in EconPapers)
JEL-codes: F12 O14 F43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int and nep-opm
Date: 2017
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Related works:
Working Paper: Industrialisation and the Big Push in a Global Economy (2017) Downloads
Working Paper: Industrialisation and the big push in a global economy (2017) Downloads
Working Paper: Industrialisation and the Big Push in a Global Economy (2016) Downloads
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