The Economics of Price Scissors
AbstractWe analyze consequences of changing the terms of trade between agriculture and industry on capital accumulation and on welfare of workers in different sectors. The issue was central to Soviet industrialization debate and it remains important in today's developing world. Through a simple general equilibrium model, we show that a price squeeze on peasants increases accumulation (as Preobrazhensky argued), but it makes both urban and rural workers worse-off (contrary to Preobrazhensky's contention). The desirable changes in terms of trade are shown to depend on intertemporal valuations, but, within a range, not on rural-urban welfare trade-off. Our characterization of the optimal terms of trade is remarkably simple, in which the roleof welfare weights and of relevant empirical parameters are easily as certained.We then extend our analysis to economies with labor mobility and unemployment and, using a simple model with rigid industrial wage, show that the optimal terms of trade entail a tax on urban sector,a subsidy to rural sector, and a level of urban employment such that the urban wage exceeds the marginal product of urban worker.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1156.
Date of creation: Jun 1983
Date of revision:
Publication status: published as Sah, Raaj Kumar and Joseph E. Stiglitz. "The Economics of Price Scissors." American Economic Review, Vol.74, No. 1, (March 1984), pp. 125-138.
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Yanagihara, Toru & Hisamatsu, Yoshiaki, 1998. "Development strategy reconsidered : Mexico, 1960-94," Policy Research Working Paper Series 1889, The World Bank.
- Chong-En Bai & Yingjuan Du & Zhigang Tao & Sarah Y. Tong, 2003.
"Local Protectionism and Regional Specialization: Evidence from China’s Industries,"
William Davidson Institute Working Papers Series
2003-565, William Davidson Institute at the University of Michigan.
- Bai, Chong-En & Du, Yingjuan & Tao, Zhigang & Tong, Sarah Y., 2004. "Local protectionism and regional specialization: evidence from China's industries," Journal of International Economics, Elsevier, vol. 63(2), pages 397-417, July.
- Cao, Kang Hua & Birchenall, Javier A., 2013. "Agricultural productivity, structural change, and economic growth in post-reform China," Journal of Development Economics, Elsevier, vol. 104(C), pages 165-180.
- Huff, Gregg & Angeles, Luis, 2011. "Globalization, industrialization and urbanization in Pre-World War II Southeast Asia," Explorations in Economic History, Elsevier, vol. 48(1), pages 20-36, January.
- Singh, A & Tabatabai H, 1992. "World economic crisis and third world agriculture: the changing role of agriculture in economic development," ILO Working Papers 286955, International Labour Organization.
- Carter, Colin A. & Zhu, Jing, 2009. "Trade Liberalization and Agricultural Terms of Trade in China: Price Scissors Revisited," 2009 Conference, August 16-22, 2009, Beijing, China 51636, International Association of Agricultural Economists.
- Bai, Chong-En & Tao, Zhigang & Tong, Yueting Sarah, 2008. "Bureaucratic integration and regional specialization in China," China Economic Review, Elsevier, vol. 19(2), pages 308-319, June.
- Stiglitz, Joseph E., 1987.
"Pareto efficient and optimal taxation and the new new welfare economics,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 15, pages 991-1042
- Joseph E. Stiglitz, 1987. "Pareto Efficient and Optimal Taxation and the New New Welfare Economics," NBER Working Papers 2189, National Bureau of Economic Research, Inc.
- Justin Yifu Lin & Miaojie Yu, 2008. "The Economics of Price Scissors : An Empirical Investigation for China," Governance Working Papers 22019, East Asian Bureau of Economic Research.
- Braverman, Avishay & Guasch, J. Luis, 1989. "Rural credit in developing countries," Policy Research Working Paper Series 219, The World Bank.
- Dethier, Jean-Jacques & Effenberger, Alexandra, 2012.
"Agriculture and development: A brief review of the literature,"
Elsevier, vol. 36(2), pages 175-205.
- Dethier, Jean-Jacques & Effenberger, Alexandra, 2011. "Agriculture and development : a brief review of the literature," Policy Research Working Paper Series 5553, The World Bank.
- Pande, Rohini, 2006.
"Profits and politics: Coordinating technology adoption in agriculture,"
Journal of Development Economics,
Elsevier, vol. 81(2), pages 299-315, December.
- Rohini Pande, 2005. "Profits and Politics: Coordinating Technology Adoption in Agriculture," Working Papers 922, Economic Growth Center, Yale University.
- Fiszbein, Ariel, 1992. "Do workers in the informal sector benefit from cuts in the minimum wage?," Policy Research Working Paper Series 826, The World Bank.
- Torvik, Ragnar, 1997. "Agricultural supply-led industrialization: A macromodel with sub-Saharan African characteristics," Structural Change and Economic Dynamics, Elsevier, vol. 8(3), pages 351-370, August.
- Yousef, Tarik M., 2000. "The Political Economy of Interwar Egyptian Cotton Policy," Explorations in Economic History, Elsevier, vol. 37(4), pages 301-325, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.