Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161914
Authors: 
Kreickemeier, Udo
Wrona, Jens
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6475
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 globalization 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.
Subjects: 
poverty traps
multiple equilibria
international trade
technology upgrading
general oligopolistic equilibrium
JEL: 
F12
O14
F43
Document Type: 
Working Paper

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