Discussion Paper
Start-up costs and pecuniary externalities as barriers to economic development
Matsuyama, Kiminori; Ciccone, Antonio (1993)
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 ...
Discussion Paper / Institute for Empirical Macroeconomics , Paper 83