Start-up costs and pecuniary externalities as barriers to economic development

Abstract

We use a dynamic monopolistic competition model 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 turn implies a small inducement to introduce new intermediate inputs. The start-up costs, which make the intermediate inputs producers subject to dynamic increasing returns, and pecuniary externalities that result from the factor substitution in the final goods sector, play essential roles in the model.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 182 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.