Big Push Theory Literature Review

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CHAPTER TWO LITERATURE REVIEW 2.1 Theoretical framework The theoretical basis of this study centers on:  Big push theory  Balance growth theory  Unbalance growth theory 2.1.1 The Big push theory According to PaulRosensten-Rodan (1943), Big push model is a theory that emphasizes that underdeveloped countries required large amount of investments to embark on the path of economic development from the present state of backwardness. This theory is of the view that ‘bit by bit’ investment programmed will not lead to the path of economic development, rather through investing a specific amount can help in economic development. The theory is also of the view that in order for a country to achieve economic development, there must exist three indivisibilities in underdeveloped countries: i. Indivisibilities in production function: In establishing so many industries the factor of production are required for the production of goods and services. According to Rodan , an economy that arises as a result of investing in social over head capital, such as roads, communication, transportation ,and many others helps to contribute to the economic development of that country. ii. Indivisibilities of demand: The demand of goods and services is limited in UDCs (Under developed countries) due to lower incomes, therefore making investment in one project may be risky, it is required that UDCs should established industries that can support each other. iii. Indivisibilities in supply of savings: this

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