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Beyond Terms of Trade: Convergence/Divergence and Creative/Uncreative Destruction

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  • Sir H. W. Singer

    (The Institute of Development Studies, at the University of Sussex)

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    Abstract

    The paper describes the various ways in which the Prebisch-Singer thesis of tendency to deteriorating terms of trade of poorer countries went against a prevailing trend of optimistic expectations of convergence in per capita income levels among countries. The actual evidence in the context of a globalising world economy is one of divergence rather than convergence although a number of exceptions to this general tendency are also noted. The paper then discusses debt pressures as a new factor strengthening the original Prebisch thesis. The ‘fallacy of composition’ involved in countries simultaneously trying to be more outward-oriented is discussed. It can only be avoided by the creation of new technological capacity creating new dynamic comparative advantages. The discussion concludes by relating the argument to Schumpeter’s concept of ‘creative destruction’ and notes some neglected welfare aspects of innovation and increasing the variety of available goods.

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    Bibliographic Info

    Article provided by Faculty of Economics and Business, University of Zagreb in its journal Zagreb International Review of Economics and Business.

    Volume (Year): 1 (1998)
    Issue (Month): 1 (May)
    Pages: 13-25

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    Handle: RePEc:zag:zirebs:v:1:y:1998:i:1:p:13-25

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    Related research

    Keywords: Terms of trade; convergence/divergence; debt pressure; welfare effects of innovation.;

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    Cited by:
    1. Rod Tyers & Jane Golley & Ian Bain, 2007. "Projected Economic Growth in China and India: The Role of Demographic Change," ANU Working Papers in Economics and Econometrics 2006-477, Australian National University, College of Business and Economics, School of Economics.
    2. Jane Golley & Rod Tyers, 2011. "Contrasting Giants: Demographic Change and Economic Performance in China and India," Economics Discussion / Working Papers 11-04, The University of Western Australia, Department of Economics.
    3. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: Demographic Change and the Labour Supply Constraint," PGDA Working Papers 1106, Program on the Global Demography of Aging.
    4. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Risk," ANU Working Papers in Economics and Econometrics 2006-461, Australian National University, College of Business and Economics, School of Economics.
    5. Erten, Bilge & Ocampo, José Antonio, 2013. "Super Cycles of Commodity Prices Since the Mid-Nineteenth Century," World Development, Elsevier, vol. 44(C), pages 14-30.
    6. Bilge Erten, 2010. "Industrial Upgrading and Export Diversification: A Comparative Analysis of Economic Policies in Turkey and Malaysia," Working Papers id:2778, eSocialSciences.
    7. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Premia," PGDA Working Papers 1206, Program on the Global Demography of Aging.
    8. Jane Golley & Rod Tyers, 2006. "Demographic Change and the Labour Supply Constraint," ANU Working Papers in Economics and Econometrics 2006-467, Australian National University, College of Business and Economics, School of Economics.

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