Banks with market power,sectoral structure and the big push

Due to complementarities between different investment projects, simultaneous implementation of many investment projects (big push) may be needed to avoid coordination failures. This paper examines potential and limitations of private coordination by banks with market power. Our analysis shows that such private coordination may not work if banks with market power find it more profitable to finance firms in the traditional sector than in the modern sector. Our results highlight the importance of sectoral policies in addressing coordination failures.