Big Push Theory

In: Business and Management

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PED401. Applications and Cases in International Development

Teaching Notes 1

The Big Push: what does it mean, and does it make sense for Ethiopia?
The idea of the Big Push is one of the earliest in development economics, coined by Rosenstein-Rodan over 60 years ago in the context of a classic work on “the problem of industrialization of eastern and south-eastern Europe”. The core argument is that coordination problems, in the context of increasing returns, create the possibility of multiple equilibria. A poor country can be caught in a low-equilibrium “poverty trap”, government intervention can potentially solve the coordination problem, and “push” the economic into the better equilibrium allowing a “take-off” into sustained growth. The Big Push idea has returned to the center of development policy in the recent past. William Easterly (2006) described 2005 as the Year of the Big Push. It has done so in particular in the context of debates over Africa: the compelling normative case to transform development possibilities of Africans, has been associated with renewed emphasis on the positive case for a Big Push. This has been linked to the case for a major expansion in aid, notably in the work of the Commission for Africa and the Millennium Development Goals; Jeffrey Sachs has been a vigorous exponent of this linkage. This case concerns the analytics of the Big Push, the evidence and its applicability to a poor African country. It bridges issues of growth (from macro) and general equilibrium (from micro). There are three parts. The first outlines the analytics: it uses the prism of the Solow growth model to look at three possible cases for multiple equilibria, and focuses on the coordination problem as one account. The second looks at approaches to evidence from cross-country patterns, and from country experiences. The third poses the question of Big Push…...

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