Urban infrastructure and industrialization

Public infrastructure in Third World cities is generally in a fairly poor c ondition. The quality of infrastructure services is further eroded by the r apid population growth in must of these cities. Poor infrastructure reduces the profitability of modern sector manufacturing and may therefore inhibit industrialization. The present analysis demonstrates that there may arise situations with stable, multiple equilibria: a high-income equilibrium invo lving modern manufacturing and a low-income equilibrium involving tradition al manufacturing, (C) 2000 Academic Press.