A
Economic concept explaining why people might not trust others due to risks involved so coordination doesn't occur.
Moral Hazard
The assumption of minimum labor required to operate for the modern sector in the Big Push Model is assumed to be the modern sector's _____________.
Fixed Cost
In the Big Push Model, when the wage graph is below the initial investment point, what can be concluded about the behavior of the initial investor?
They will invest even without intervention from government (It's profitable)
Give an example where multiple equilibria exist
Many examples (poverty trap; skills and firms; etc.)
Give 2 reasons why a "Super Entrepreneur" cannot solve the problem of multiple equilibria
Capital Market Failures, Costs of Managing Managers, Communication Failures, Limits to Knowledge, Empirical Evidence
Many development specialists look actively for cases in which government policy can still help, even when government is imperfect, by pushing the economy toward a self-sustaining, better equilibrium. What do you call this intervention by government?
Deep Intervention
What's the conclusion of the O-Ring Model?
Specialization is important
In the Big Push Model, when the wage graph is above the initial investment point, but below the future investment point, what can be concluded about the behavior of the initial investor?
Government intervention is needed to make them invest
This means that workers with high skills will work together and workers with low skills will work together.
assortative matching
What is the assumption of the Big Push Model regarding Factors of Production?
Labor is the only factor of production and it has a fixed supply
What is the assumption of the Big Push Model regarding trade with other countries?
The economy is closed
According to Rodan, what is the type of economy that cannot export and will have severe problems in industrializing
subsistence economy
An action taken by one firm, worker, or organization that increases the incentives for other agents to take similar actions.
Complementarities
In the Big Push Model, when the wage graph is above the future investment point, what can be concluded about the behavior of the initial investor?
No investment will be made with or without government intervention
What is the reason why the Big Push Model assumes that there's a wage differential between the traditional and modern sector?
disutility of modern factories
Who posited the Big Push Model?
Paul Rosenstein-Rodan
Under the assumptions of the Big Push Model, traditional sector wages is assumed to be equal to 1. This is called a ____________.
Numeraire
Economic concept explaining the challenges of an owner and it relationship with its managers who might have a different set of interests that conflict with company goals
Principal-Agent Problem
According to our discussion, what is the solution to the coordination problem in Agriculture?
middlemen
Connection between firms wherein a firm sells to another firm
Forward Linkage
What can you say about the graph of the traditional sector's production function in the Big Push Model?
It's a 45 degree line with slope = 1 (since wage = 1)
Who posited the O-Ring Model?
Michael Kremer
Connection between firms wherein a firm buys a good from another firm to use as an input
Backward Linkage
What is the value of the assumed wage of the modern sector in the Big Push Model?
Greater than 1
State the equation representing the labor requirements for the modern sector in the Big Push Model
L = F + cQ