Question

Briefly explain the Big Push Theory. And why it may it be necessary.

Answer 1

The big push theory is a concept associated with the development economics or welfare economics which mainly focuses in the fact that the decision of a firm whether to industrialize or not will greatly affect by the expectation of it about the reaction of action of other organizations. This model is based on the assumption of economies of scale and oligopolistic market structure and provides a reasoning about the time when the industrialization can initiate. As per this theory, in order to take the full advantage of external economies, It is important to have all investment in different interdependent industries to be made as per the well-established plan of economic development.

The main significance of this theory is that it indicates the different factors which can lead to the industrialization of the economy and it expresses that if the investment is done below a certain level, it will be completely waste as desired results will not be obtained from smaller investment in the economy. This theory helps in understanding the intertemporal effect, urbanization effect, infrastructure effect, and training effect on the economy