Assessing the Dynamics of Terms of Trade in a Model of Cumulative Causation and Structural Change

Araujo, Ricardo (2013): Assessing the Dynamics of Terms of Trade in a Model of Cumulative Causation and Structural Change.

Abstract

Following a structural economic dynamic approach, this paper examines the potential impact of cumulative causation on the dynamics of terms of trade between North-South countries. Cumulative causation although being responsible for generating technical progress may cause leakage of some productivity gains from the exporting sectors to abroad. In this vein possibilities exist that the laggard countries benefit from this effect but the final outcome depends on structural economic dynamics of both developed and underdeveloped nations. The overall dynamics of the terms of trade is then shown to be strongly affected both by demand and supply considerations.

• Item Type: MPRA Paper
• Language: English
• Keywords: Structural economic dynamics, terms of trade, cumulative causation.
• Subjects: F - International Economics > F1 - Trade > F10 - General; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O24 - Trade Policy ; Factor Movement Policy ; Foreign Exchange Policy; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights

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