The North-South Terms of Trade Debate: A Re-Examination

Abstract:     
Contrary to the classical proposition, the works of Prebisch and Singer launched the controversial hypothesis of long-term decline in the terms of trade of primary products vis-à-vis manufactures and a corresponding decline in the terms of trade of the South vis-à-vis the North.

The present study traces the origin and evolution of the hypothesis and reviews the related statistical debate. It concludes that the empirical base of the Prebisch-Singer hypothesis is much stronger than it appeared in earlier decades. Reviewing some of the North-South models, the study also finds theoretical support for the Prebisch-Singer hypothesis.

Keywords: commodity prices, North-South trade, Prebisch-Singer hypothesis, terms of trade

JEL Classification: F00, O19, O50

Accepted Paper Series