Industrialization with a Menu of Technologies: Appropriate Technologies and the "Big Push"

Abstract

The recent formal literature on industrialization considers the technological choice space as a simple binary choice between a constant returns and increasing returns technology. The latter involves a large fixed cost yielding labor productivity gains. In line with arguments based on the availability of "appropriate" technologies, this paper considers a continuous technology space--the level of fixed costs is assumed to be endogenous with greater levels resulting in progressively higher labor productivity. Under this alternative assumption, it is shown that conclusions regarding the multiplicity of decentralized equilibria are not robust to this change and that a unique equilibrium can easily result. Finally, the social optimality of the equilibrium outcomes are analyzed.

JEL Classification: O14