Start-Up Costs and Pecuniary Externalities as Barriers to Economic Development / Antonio Ciccone, Kiminori Matsuyama.

Format:

Book

Author/Creator:

Ciccone, Antonio.

Contributor:

National Bureau of Economic Research.

Matsuyama, Kiminori.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4363.

NBER working paper series no. w4363

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1993.

Summary:

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.

Notes:

Print version record

May 1993.