This paper explores Rosenstein-Rodan's idea that simultaneous industrialization of many sectors of the economy can be profitable for them all even when no sector can break even industrializing alone. We analyze this idea in the context of an imperfectly competitive economy with aggregate demand spillovers and interpret the big push into industrialization as a move from a bad to a good equilibrium. We present three mechanisms for generating a big push and discuss their relevance for less developed countries.

When world trade is costly, a country can profitably industrialize only if its domestic markets are large enough. In such a country, for increasing returns technologies to break even, sales must be high enough to cover fixed setup costs. We suggest two conditions conducive to industrialization. First, a leading sector, such as agriculture or exports, must grow and provide the source of autonomous demand for manufactures. Second, income generated by this leading sector must be broadly enough distributed that it materializes as demand for a broad range of domestic manufactures. These conditions have been important in several historical growth episodes.

This paper explores Paul N. Rosenstein-Rodan's idea that simultaneous industrialization of many sectors of the economy can be profitable for them all even when no sector can break even industrializing alone. The authors analyze this idea in the context of an imperfectly-competitive economy with aggregate demand spillovers, and interpret the big push into industrialization as a move from a bad to a good equilibrium. They present three mechanisms for generating a big push and discuss their relevance for less-developed countries. Copyright 1989 by University of Chicago Press.