Trend in the international terms of trade between primary producers and manufacturers

✍ Scribed by Harry Bloch; David Sapsford

• Publisher: John Wiley and Sons
• Year: 1996
• Tongue: English
• Weight: 973 KB
• Volume: 8
• Category: Article
• ISSN: 0954-1748
• DOI: 10.1002/(sici)1099-1328(199601)8:1<53::aid-jid245>3.0.co;2-x

✦ Synopsis

Movements in the terms of trade between primary producers and manufacturers are analyzed using a model that introduces the influence of relative wage movements in the primary and manufacturing sectors as well as the influence of mark-up pricing in manufacturing. The model is estimated using data on the relative price of primary commodities and manufactured goods in international trade during the post-World War I1 (WWII) period. A decline in wages of primary-sector workers relative to those of workers in manufacturing and a rise in manufacturing margins are both estimated to have reduced the terms of trade for primary producers. However, expansion of manufacturing output is estimated to have a positive impact that has more than offset the negative influences during periods of moderate to strong growth.

Helpful comments on earlier versions of this paper were received from Ben Heijdra, Hans Singer and John Spraos as well as from two anonymous referees of this journal and seminar participants at the Universities of Salford and Tasmania. The advice has not always been followed and the authors remain responsible for any shortcomings of the present version.