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

Ziesemer, Thomas HW (1994): Economic Development and Endogenous Terms-of-Trade Determination: Review and Reinterpretation of the Prebisch-Singer Thesis. Published in: Unctad Review (1995): pp. 17-33.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Prebisch-Singer Thesis, terms of trade, growth, development.
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B50 - General; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development ; Role of International Organizations; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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