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Economic Development and Endogenous Terms-of-Trade Determination: Review and Reinterpretation of the Prebisch-Singer Thesis

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  • Ziesemer, Thomas HW

Abstract

In 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.

Suggested Citation

  • Ziesemer, Thomas HW, 1994. "Economic Development and Endogenous Terms-of-Trade Determination: Review and Reinterpretation of the Prebisch-Singer Thesis," MPRA Paper 54864, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:54864
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    File URL: https://mpra.ub.uni-muenchen.de/54864/1/MPRA_paper_54864.pdf
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    References listed on IDEAS

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    9. Griffin, Keith & Gurley, John, 1985. "Radical Analyses of Imperialism, the Third World, and the Transition to Socialism: A Survey Article," Journal of Economic Literature, American Economic Association, vol. 23(3), pages 1089-1143, September.
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    13. Andrea Maneschi, 1983. "The Prebisch-Singer Thesis and the 'Widening Gap' between Developed and Developing Countries," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 104-108, February.
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    Cited by:

    1. Bilge Erten, 2010. "Industrial Upgrading and Export Diversification: A Comparative Analysis of Economic Policies in Turkey and Malaysia," Working Papers id:2778, eSocialSciences.
    2. Thomas H.W. Ziesemer, 2014. "Country terms of trade: trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(6), pages 767-796, September.
    3. Barbier,Edward B., 2007. "Natural Resources and Economic Development," Cambridge Books, Cambridge University Press, number 9780521706513.
    4. Alexis Habiyaremye & Thomas H. W. Ziesemer, 2012. "Export demand elasticities and productivity as determinants of growth: estimates for Mauritius," Applied Economics, Taylor & Francis Journals, vol. 44(9), pages 1143-1158, March.
    5. Habiyaremye, Alexis & Ziesemer, Thomas, 2008. "Export Demand Elasticities as Determinants of Growth: Estimates for Mauritius," MERIT Working Papers 072, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    6. Christine Mutz & Thomas Ziesemer, 2008. "Simultaneous estimation of income and price elasticities of export demand, scale economies and total factor productivity growth for Brazil," Applied Economics, Taylor & Francis Journals, vol. 40(22), pages 2921-2937.
    7. José Antonio Ocampo & María Angela Parra, 2004. "The commodity terms of trade and their strategic implications for development," International Trade 0403001, EconWPA.
    8. Fayissa, Bichaka & Nsiah, Christian & Joshi, Prathibha V., 2010. "Perceived Financial Risk and the Economic Growth of sub-Saharan African Countries - Rischio finanziario percepito e divergenza nella crescita economica dei paesi dell’Africa sub-sahariana," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(2), pages 179-192.
    9. A. Salehizadeh & Peter Berezin & Elcior Santana, 2002. "The Challenge of Diversification in the Caribbean," IMF Working Papers 02/196, International Monetary Fund.

    More about this item

    Keywords

    Prebisch-Singer Thesis; terms of trade; growth; development.;

    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, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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