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Inter-Sectoral Terms of Trade and Investible Surplus

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  • Mohsen Fardmanesh

    (Temple University)

Abstract

This paper studies the validity of the Preobrazhensky’s First Proposition, P1, for the centrally planned Poland during the period of 1960-1987 by testing whether the state increased its internal accumulation, investible surplus, by reducing the inter-sectoral terms of trade between agriculture and industry. It uses an alternative bivariate approach with pair-wise cointegration and Granger causality analysis. While finding some support for P1 in Poland, it reveals that the existing multivariate empirical approach derived from the Sah-Stiglitz’s market-based theoretical model of the ‘price scissors’ problem can misrepresent not only the validity of P1 in a centrally planned economy but also the impact of the intrinsic determinants of the state’s investible surplus such as the production capacities in agriculture and industry.

Suggested Citation

  • Mohsen Fardmanesh, 2017. "Inter-Sectoral Terms of Trade and Investible Surplus," Working Papers 1060, Economic Growth Center, Yale University.
    • Handle: RePEc:egc:wpaper:1060
    as

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    File URL: https://egcenter.economics.yale.edu/sites/default/files/files/CDP-cdp1001-cdp1100/cdp1060.pdf
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    References listed on IDEAS

    as
    1. Knight, John, 1995. "Price Scissors and Intersectoral Resource Transfers: Who Paid for Industrialization in China?," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 117-135, January.
    2. Cihan Bilginsoy, 1997. "A macroeconomic analysis of agricultural terms of trade in Turkey, 1952-90," Journal of Development Studies, Taylor & Francis Journals, vol. 33(6), pages 797-819.
    3. Blomqvist, Ake G, 1986. "The Economics of Price Scissors: Comment," American Economic Review, American Economic Association, vol. 76(5), pages 1188-1191, December.
    4. Carter, Michael R, 1986. "The Economics of Price Scissors: Comment," American Economic Review, American Economic Association, vol. 76(5), pages 1192-1194, December.
    5. Baland, Jean-Marie, 1993. "The economics of price scissors: A defence of Preobrazhensky," European Economic Review, Elsevier, vol. 37(1), pages 37-60, January.
    6. Maddala,G. S. & Kim,In-Moo, 1999. "Unit Roots, Cointegration, and Structural Change," Cambridge Books, Cambridge University Press, number 9780521587822.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Anu Keshiro Toriola & Emmanuel Oladapo George & Walid Gbadebo Adebosin, 2021. "The Nexus Between Commodity Terms and National Terms of Trade of Sub-Sahara African Countries: Implication for Intersectoral Linkage," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 19(1), pages 79-98.

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    More about this item

    Keywords

    Price Scissors; Internal Accumulation; Investible Surplus; Inter-sectoral Terms of Trade; Central Planning; Poland;
    All these keywords.

    JEL classification:

    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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