Economic Development and Endogenous Terms-of-Trade Determination: Review and Reinterpretation of the Prebisch-Singer Thesis
AbstractIn this paper the theoretical literature relating to the Prebisch-Singer Thesis and economic development is extensively reviewed. The aim is to examine models which exhibit a positive relation between indicators of economic development, such as per capita income, real wages, or employment and terms of trade development. In many models the economy is better off when terms of trade fall and income and price elasticities do not appear in the growth rate solutions. As this is at variance with the Prebisch-Singer Thesis, two simple models have been developed: (i) in a vent-for-surplus model, income and price elasticities appear in the solution for employment, but the terms of trade are driven down by the factors that increase employment; (ii) in a model with exogenous employment and imported capital goods, higher income elasticities of export demand increase in the long run growth rates of real wages, per capital income, capital-labour ratio and terms of trade, thus representing the ideas of Prebisch, Singer and Myrdal on the relation between exports and growth.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 54864.
Date of creation: 1994
Date of revision:
Prebisch-Singer Thesis; terms of trade; growth; development.;
Find related papers by JEL classification:
- B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O19 - Economic Development, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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