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Whither the Terms of Trade? An Elaboration of the Prebisch-Singer Hypothesis

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  • Bloch, Harry
  • Sapsford, David

Abstract

Movements in the prices of primary products and manufactured goods are analysed using a model that introduces differences in wage and price determination between primary production and manufacturing. Wages and prices in primary production are treated as competitively determined, while prices and wages in manufacturing are determined by mark-up pricing and union-employer bargaining, respectively. The objective is to capture the influence of structural differences between manufacturing and primary production on the terms of trade between industrialised and developing worlds as discussed in the seminal contributions to the development literature by Raul Prebisch and Hans Singer. The model is estimated using price and wage data from the post-World War II period. Support is found for the Prebisch-Singer hypothesis; however, our estimates suggest that, during periods of particularly rapid manufacturing growth, there have been intervals of net improvement in the terms of trade of primary producers. Copyright 2000 by Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

Volume (Year): 24 (2000)
Issue (Month): 4 (July)
Pages: 461-81

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Handle: RePEc:oup:cambje:v:24:y:2000:i:4:p:461-81

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Cited by:
  1. Ghoshray Atanu & Kejriwal Mohitosh & Wohar Mark, 2014. "Breaks, trends and unit roots in commodity prices: a robust investigation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 18(1), pages 23-40, February.
  2. Andrew Mold and Annalisa Prizzon, 2010. "Fragile States, Commodity Booms And Export Performance: An Analysis Of The Sub-Saharan African Case," EUI-RSCAS Working Papers 21, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. Cuddington, John T. & Ludema, Rodney & Jayasuriya, Shamila A, 2002. "Prebisch-Singer Redux," Working Papers 15857, United States International Trade Commission, Office of Economics.
  4. Muradian, Roldan & O'Connor, Martin & Martinez-Alier, Joan, 2002. "Embodied pollution in trade: estimating the 'environmental load displacement' of industrialised countries," Ecological Economics, Elsevier, vol. 41(1), pages 51-67, April.
  5. Surajit Deb, 2003. "Terms of Trade and Supply Response of Indian Agriculture: Analysis in Cointegration Framework," Working papers 115, Centre for Development Economics, Delhi School of Economics.
  6. Ghoshray, Atanu & Kejriwal, Mohitosh & Wohar, Mark E., 2011. "Breaking Trends and the Prebisch-Singer Hypothesis: A Further Investigation," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 120387, European Association of Agricultural Economists.
  7. Bloch, Harry & Sapsford, David, 2012. "The Malthusian Paradox: Declining Food Prices in the Very Long Run," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124240, Australian Agricultural and Resource Economics Society.
  8. Jörg Mayer, 2002. "The Fallacy of Composition: A Review of the Literature," The World Economy, Wiley Blackwell, vol. 25(6), pages 875-894, 06.
  9. Paul Newbold & Stephan Pfaffenzeller & Anthony Rayner, 2005. "How well are long-run commodity price series characterized by trend components?," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(4), pages 479-494.
  10. Ziesemer, Thomas, 2011. "Country terms of trade: Trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity," MERIT Working Papers 065, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  11. José Antonio Ocampo & María Angela Parra, 2004. "The commodity terms of trade and their strategic implications for development," International Trade 0403001, EconWPA.
  12. Christopher Blattman & Jason Hwang & Jeffrey G. Williamson, 2003. "The Terms of Trade and Economic Growth in the Periphery 1870-1938," NBER Working Papers 9940, National Bureau of Economic Research, Inc.
  13. Bilge Erten, 2010. "Industrial Upgrading and Export Diversification: A Comparative Analysis of Economic Policies in Turkey and Malaysia," Working Papers id:2778, eSocialSciences.
  14. Araujo, Ricardo, 2013. "Assessing the Dynamics of Terms of Trade in a Model of Cumulative Causation and Structural Change," MPRA Paper 46049, University Library of Munich, Germany.
  15. Kaplinsky, Raphael, 2006. "Revisiting the revisited terms of trade: Will China make a difference?," World Development, Elsevier, vol. 34(6), pages 981-995, June.
  16. André Varella Mollick & Jo�o Ricardo Faria & Pedro H. Albuquerque & Miguel A. León-Ledesma, 2008. "Can globalisation stop the decline in commodities' terms of trade?," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 683-701, September.

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