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Start-up costs and pecuniary externalities as barriers to economic development

Author: Antonio Ciccone; Kiminori Matsuyama; National Bureau of Economic Research.
Publisher: Cambridge, MA. : National Bureau of Economic Research, [1993]
Series: Working paper series (National Bureau of Economic Research), working paper no. 4363.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
Abstract: One critical aspect of economic development is that productivity growth and a rising standard of living are realized through more roundabout methods of production and increasing specialization of intermediate inputs and producer services. We use an extended version of the Judd-Grossman-Helpman model of dynamic monopolistic competition to show that an economy that inherits a small range of specialized  Read more...
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Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Antonio Ciccone; Kiminori Matsuyama; National Bureau of Economic Research.
OCLC Number: 70045215
Notes: "May 1993."
Description: 1 online resource (31, [4] pages) : illustrations.
Series Title: Working paper series (National Bureau of Economic Research), working paper no. 4363.
Responsibility: by Antonio Ciccone and Kiminori Matsuyama.

Abstract:

Abstract: One critical aspect of economic development is that productivity growth and a rising standard of living are realized through more roundabout methods of production and increasing specialization of intermediate inputs and producer services. We use an extended version of the Judd-Grossman-Helpman model of dynamic monopolistic competition to show that an economy that inherits a small range of specialized inputs can be trapped into a lower stage of development. The limited availability of specialized inputs forces the final goods producers to use a labor intensive technology, which in turns implies a small inducement to introduce new intermediate products. The start-up costs, which make the intermediate goods producers subject to dynamic increasing returns, and pecuniary externalities that result from the factor substitution in the final goods sector, play essential roles in the model.

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