key term - Big push model

Definition

The big push model is an economic theory that suggests that developing countries need a significant, coordinated investment in multiple sectors to overcome barriers to growth and achieve sustained economic development. This model argues that without such a substantial initial investment, the economy may remain stagnant due to the interdependence of different sectors and the presence of market failures.

5 Must Know Facts For Your Next Test

1. The big push model emphasizes the need for simultaneous investments across various sectors such as agriculture, industry, and infrastructure to spark overall economic growth.
2. This model counters the belief that small, incremental investments can lead to growth; instead, it argues for a large-scale strategy to break the cycle of poverty.
3. One key assumption of the big push model is that economies experience increasing returns to scale, meaning that larger investments can lead to disproportionately larger outputs.
4. It highlights the importance of addressing market failures that can prevent investment in crucial sectors, thus necessitating government or external intervention.
5. Countries that have successfully implemented the big push model often saw a rapid transition from agrarian economies to more diversified and industrialized economies.

Review Questions

• How does the big push model illustrate the concept of coordination failure in economic development?
  • The big push model highlights coordination failure by showing how individual investments in isolation may not lead to economic growth. For example, if a country invests only in one sector like agriculture without improving transportation or infrastructure, the potential benefits may be limited. The model suggests that coordinated investments across multiple sectors are necessary for breaking this cycle and achieving growth.
• In what ways does the big push model challenge traditional views on incremental investment strategies in developing economies?
  • The big push model challenges traditional views by arguing that small, incremental investments often fail to address the interconnected issues that hinder development. It posits that without a significant initial investment across various sectors simultaneously, economies might continue to stagnate due to market failures and coordination problems. This perspective shifts the focus from gradual changes to comprehensive strategies for overcoming systemic barriers.
• Evaluate the effectiveness of the big push model in contemporary economic policy and its implications for developing nations today.
  • The effectiveness of the big push model in contemporary economic policy can be seen in several developing nations that have adopted integrated investment strategies. While some countries have successfully implemented large-scale projects that foster multi-sectoral growth, others struggle due to insufficient coordination and resources. Analyzing these outcomes helps policymakers understand when a big push may be necessary or when alternative approaches could be more beneficial, ultimately influencing how developing nations strategize their economic development.

Related terms

Market Failure: A situation in which the allocation of goods and services is not efficient, often due to factors like externalities, monopolies, or public goods.

Coordination Failure: A scenario where individuals or firms fail to achieve a beneficial outcome because they do not coordinate their actions effectively, often leading to under-investment.

Economic Development:

The process by which a nation improves the economic, political, and social well-being of its people, typically measured by indicators like GDP growth, employment rates, and quality of life.