mascer

Binding Constraint

The one limiting factor that, if relaxed, would accelerate economic growth or allow a larger amount of a targeted outcome.

Agency Costs

Costs incurred from monitoring managers and employees, as well as designing schemes to ensure compliance or incentivize alignment with employer goals.

Economic Agent

An economic actor (such as a firm, worker, consumer, or government official) that chooses actions to maximize a specific objective.

Complementarity

An action taken by one firm or actor that increases the incentives for other agents to take similar actions, often involving interdependent investments.

Coordination Failure

A situation in which the inability of agents to coordinate their choices leads to an equilibrium that leaves all parties worse off than an alternative equilibrium.

Big Push

A concerted, economy-wide, and public policy–led effort to initiate or accelerate economic development across a broad spectrum of industries and skills.

O-Ring Model

An economic model where production functions exhibit strong complementarities among inputs, illustrating key impediments to economic development.

Middle-Income Trap

A condition in which an economy reaches middle-income status but is chronically unable to progress to high-income status due to low innovation or technology absorption.

Underdevelopment Trap

A poverty trap at the regional or national level in which economic stagnation perpetually reinforces itself over time.

Poverty Trap

A bad equilibrium involving a vicious circle where poverty and underdevelopment lead to further poverty, often persisting across generations.

Deep Intervention

A government policy moving an economy to a self-sustaining, preferred equilibrium so that the policy no longer requires active enforcement.

Congestion

An action taken by one agent that decreases the incentives for other agents to take similar actions; the opposite of complementarity.

Where-to-Meet Dilemma

A situation where parties benefit from cooperating rather than competing but lack information on how to do so, with no incentive to defect once achieved.

Prisoners' Dilemma

A situation where parties benefit from cooperation, but each has an incentive to cheat once agreement is reached, causing cooperation to unravel.

Multiple Equilibria

A condition where more than one equilibrium exists, and unaided market forces fail to move the economy to the superior outcome.

Pareto Improvement

A reallocation or situation where at least one person is made better off without making anyone else worse off.

Asymmetric Information

A scenario where one party in a potential transaction possesses more or superior information compared to the other party.

Information Externality

The unmediated spillover of production or process knowledge from one agent to another, reflecting public good characteristics.

Technological Externality

A positive or negative spillover effect on a firm's production function occurring through non-market means.

Pecuniary Externality

A positive or negative spillover effect operating directly on an agent's costs or revenues via market mechanisms.

Linkages

Sales-based connections between firms, classified as backward (buying input goods) or forward (selling output goods to other firms).

O-Ring Production Function

A production function featuring strong complementarities among inputs, calculated by multiplying input quality levels.

Growth Diagnostics

A decision tree framework used to identify a country's most binding constraints on economic growth.

Social Returns

The total profitability of an investment when both costs and benefits are evaluated from the perspective of society as a whole.