Question #5: a. Provide one reason why Prebisch, Singer, and Myrdal give for the
ID: 1119788 • Letter: Q
Question
Question #5: a. Provide one reason why Prebisch, Singer, and Myrdal give for their belief that the commodity terms of trade of developing nations have a tendency to deteriorate over time. b. Provide one criticism that have been levied against the United Nation study that Prebisch and Singer quoted in their work to confirm their belief? What conclusions can be reached on the basis of the many empirical studies conducte as to the movement of the commodity and income terms of trade of developing natio over the past century and especially since World War II?Explanation / Answer
a. Developing nations are majorly exporters of primary goods, & importers of manufactured goods or capital goods. According to prebisch, singer theory in long run prices of primary goods decline compared to manufactured goods. prebisch, singer state that developed countries have monopolistic market structures with advanced technology producing low-cost to price whereas less developed export oriented countries have markets with competitive conditions resulting in high-cost to price which deteriorates commodity terms of trade of developing nations over time.
c. After the Second World War there has been keen interest in the terms of trade & commodity movement in political & economic discourse of developing nations. Changes in the terms of trade can affect the distribution of income. After the Second World War many empirical studies were conducted by different institutes & persons to respond to fast pace changes taking place in technology & industrialization. Majority of these studies suggested that developing countries must fast track the process of industrialization & diversify their exports to manufactured goods to minimize the effects of decline in the prices of commodities.