The market size, entrepreneurship, and the big push

Abstract

The logic of "balanced growth" or "big push" hypothesis does not provide the rationale for the comprehensive central planning, unless coordinated expansion across industries is difficult to achieve through spontaneous responses by creative entrepreneurs. To make this point, I model the difficulty of coordination by adding some inertia in the entrepreneurial decision processes in the Murphy-Shleifer-Vishny model of the big push and analyze the transition explicitly. The "critical minimum effort" is defined and derived as a function of the market size and entrepreneurship and used to determine whether the economy is caught in the poverty trap or can achieve a take-off. © 1992.