Trends in Terms of Trade of LDCs

Abstract

The controversial Prebisch thesis in international economics of development asserts that (i) less‐developed countries (LDCs) experience a long‐run deterioration in their terms of trade with developed countries (DCs), and (ii) these experiences are the cause of the ever‐widening gap in their per capita incomes with DCs. By surveying the controversy and discussing the connection between trends in terms of trade and international economic inequality, this paper attempts to disprove some widely held notions derived from misinterpretations and from broad generalisations with indirect inferences. We conclude that there is need for case studies; in order to evaluate and select appropriate policy options.

The terms of trade for agricultural and food products, 1951-2000

“…Group of products 1951-2000 1951-1973 1973-1988 1988-2000 Aggregate First, to establish whether structural shocks exist, we performed the conventional unit root tests on the real price series for aggregate agricultural trade between 1951 and 2000, and similarly for the nineteen product groups. Using the augmented Dickey-Fuller (ADF;1981) and Phillips-Perron tests (1988), The functional form contrasted with lags is:…”

“…Thus, it doubled for «cereals», «animal 80 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 26 . 80 19511956196119661971197619811986199121 . Leather and hides 197219873.30 3.80 4.30 4.80 5.30 5.80 19511956196119661971197619811986199104 .…”

“…80 19511956196119661971197619811986199121 . Leather and hides 197219873.30 3.80 4.30 4.80 5.30 5.80 19511956196119661971197619811986199104 . Cereals 19751984 3.80 4.30 4.80 5.30 5.80 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 29 .…”

“…A review of the principal research in this field compiled by Nguyen (1981) and extended by Diakosavvas and Scandizzo (1991) indicates that the debate remains open (see also Cuddington and Urzú a 1989). The results obtained for the secular (continuous) trend of relative prices differ according to the period analysed, the definitions used and the estimation techniques used.…”

Testing for trends in the terms of trade between primary commodities and manufactured goods

“…1016/j.jdeveco.2004.08.005 supporting conflicting views. According to the list of the most important studies on the terms of trade issue, which was originally compiled by Nguyen (1981) and extended by Diakosavvas and Scandizzo (1991), neither side of the controversy can claim victory. The results obtained on secular trends differ according to the period explored, the definitions used and the estimation techniques employed.…”