Re-testing Prebisch–Singer hypothesis: new evidence using Fourier quantile unit root test

The Prebisch–Singer hypothesis in economics asserts that over time the relative price of primary goods relative to manufactured goods should experience a downward trend. To test the hypothesis, we must first establish the unit root properties of the relative price term and then regress the stationary series on a trend term. We use the quantile unit root test which allows for both smooth unknown numbers and the form of breaks in the trend function through a Fourier function to show that the relative price of 23 out of 24 primary goods is stationary. However, the Prebisch–Singer hypothesis is supported only in half of the primary commodities.     

An interpretation of unequal exchange from Prebisch-Singer to Emmanuel

Emmanuel's view of the Center-Periphery trade relation is linked to a classical literature in trade and development theory which starts from the work of Prebisch, Singer and Lewis. A very simple general equilibrium Ricardian trade model is formulated to deal with terms of trade determination in the context of class conflict both in the Center and the Periphery. The model focuses attention on the effects of technical progress and changes in income distribution on employment levels in the Periphery, where labor surplus conditions are assumed to prevail.     

Whither the terms of trade? An elaboration of the Prebisch-Singer hypothesis

Movements in the prices of primary products and manufacturedgoods are analysed using a model that introduces differencesin wage and price determination between primary production andmanufacturing. Wages and prices in primary production are treatedas competitively determined, while prices and wages in manufacturingare determined by mark-up pricing and union-employer bargaining,respectively. The objective is to capture the influence of structuraldifferences between manufacturing and primary production onthe terms of trade between industrialised and developing worldsas discussed in the seminal contributions to the developmentliterature by Raul Prebisch and Hans Singer. The model is estimatedusing price and wage data from the post-World War II period.Support is found for the Prebisch-Singer hypothesis; however,our estimates suggest that, during periods of particularly rapidmanufacturing growth, there have been intervals of net improvementin the terms of trade of primary producers.     

TRADE IMPACTS ON SKILL ACQUISITION VIA VARIETY EXPANSION*

We show that trade enhances skill formation through gains from trade via variety expansion à la Krugman. Although workers are identical as unskilled labour, they differ in productivity as skilled labour. Workers become skilled by incurring training costs. By introducing these settings into a trade model with monopolistic competition, we show that, although trade makes all agents better off, its effect is stronger for skilled than unskilled workers, which stimulates skill acquisition. As a result of less productive workers becoming skilled, the wage dispersion among skilled workers increases.     

The long-run behaviour of the terms of trade between primary commodities and manufactures: a panel data approach

This paper examines the Prebisch and Singer hypothesis using a panel of twenty-four commodity prices from 1900 to 2010. The modelling approach stems from the need to meet two key concerns: (i) the presence of cross-sectional dependence among commodity prices; and (ii) the identification of potential structural breaks. To address these concerns, the Hadri and Rao (Oxf Bull Econ Stat 70:245–269, 2008) test is employed. The findings suggest that all commodity prices exhibit a structural break whose location differs across series, and that support for the Prebisch and Singer hypothesis is mixed. Once the breaks are removed from the underlying series, the persistence of commodity price shocks is shorter than that obtained in other studies using alternative methodologies.     

Welfare Effect of Mergers and Multilateral Trade Liberalization

In a two‐country model where firms behave à la Cournot, we show that trade liberalization increases (decreases) the social desirability of those mergers that generate sufficiently large (small) reductions in marginal cost. There exists a range of intermediate levels of marginal cost savings such that marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. Moreover, in the neighborhood of free trade, we show that if trade liberalization increases the profitability of a merger, it necessarily also increases its desirability.     

HOW DOES GLOBALIZATION AFFECT INDUSTRIAL COMPETITIVENESS?

Industrial competitiveness (IC), reflecting a country's ability to produce and export manufactures competitively, is closely associated with economic growth. How does globalization affect IC? While the topic is of great importance, empirical studies on the issue in the literature have been limited. This article attempts to close the gap by estimating the role of foreign direct investment (FDI) and international trade with cross‐country data in 1985 and 1998. Taking advantage of a recently constructed IC index, we estimate several regression models of effects of FDI and trade on industrial performance. Results suggest that FDI and trade have a positive impact on IC, and increasing integration with the world economy through FDI and trade contributes to better industrial performance. (JEL F02, F10, F21, L60)     

THE EFFECTS OF FISCAL POLICY SHOCKS IN SVAR MODELS: A GRAPHICAL MODELLING APPROACH

We apply graphical modelling (GM) theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches – which achieve identification by relying on potentially contentious a priori assumptions – GM is a data based tool. Our results are in line with Keynesian theoretical models, being also quantitatively similar to those obtained in the recent SVAR literature à la Blanchard and Perotti (2002) , and contrast with neoclassical real business cycle predictions. Stability checks confirm that our findings are not driven by sample selection.     

Evolution of Walrasian equilibrium in an exchange economy

We study the stochastic stability of a dynamic trading process in an exchange economy. We use a simplified version of a trading model à la Shapley and Shubik (J Polit Econ 85:937–968, 1977). Two types of agents equipped with Leontief preferences trade goods in markets by offering endowments, and actual trades occur at market clearing prices. Better behavior tends to spread through the same type of agents by imitation, and agents also make mistakes occasionally. We provide a sufficient condition for the perturbed dynamic process to have a unique stochastically stable state that is a Walrasian equilibrium allocation. In this sense, we give a rationale for Walrasian behavior.     

A Framework for Policy Oriented Innovation Studies in Industrialising Countries

This paper argues that there is increasing need for the integration of policy considerations in the formulation of research questions and in the development of analytical work in policy oriented innovation studies. Despite the fact that Evolutionary and Innovation Studies theories have offered new ways of incorporating policy, little explicitness in this regard has yet been achieved and there is a risk that academic research following the new perspectives will be of little relevance for policy. Rather than a ‘linear process’ starting with empirical research aimed at linking competitiveness and economic performance to technological capabilities (in a comparative perspective and aimed at identifying ‘best practice’) followed by very abstract and un-grounded ‘policy implications' - a new type of link between positive and normative economics in the field is required. Our approach suggests a new structure for policy-oriented and policy-relevant research, i.e. the integration of research on technological change and industrial transformation with research on policy and the development of a conceptual framework for the design and implementation of innovation policies.     

Capital Flows to Latin America (2003–17): A Critical Survey from Prebisch’s Business Cycle Theory

ABSTRACT

The economic literature on capital flows to developing countries has shared two important commonalities since the 1990s. Published works (whether they focus on the external situation or stress the domestic determinants of capital flows) tend to assume a beneficial effect of capital inflows, which leads to an improvement of peripheral institutions, whose deficiencies are ostensibly the main cause of economic turmoil and/or failure in attracting capital flows, in continuity with New Institutional Economics. In doing so, mainstream economists deliberately overlook the asymmetric characteristics of the international monetary system and the persisting hegemony of dollar. Raul Prebisch’s pioneering work on business cycles in Latin America provide an alternative view, one capable of amending the existing mainstream literature. On the one hand, Prebisch stressed the destabilizing role of capital inflows on Latin American economies, particularly short-term speculative capital. On the other hand, Prebisch designed a set of counter cyclical monetary policies in order to contrast capital volatility, particularly during downturns. An analysis of stylized facts shows that, when correctly updated, Prebisch’s theory has remarkable explanatory potential when applied to Latin America’s current economic and financial situation.     

On the difficulty of combining actual and potential criteria for an increase in social welfare

Summary. This paper examines two problems associated with the use of potential Pareto criteria in welfare economics. The first problem is the well-known intransitivity of the compensation criteria à la Kaldor-Hicks-Scitovsky. The second problem is the possible incompatibility between the Chipman-Moore-Samuelson criterion and the Pareto principle. The main result of this paper is that, in order to avoid either of these problems, it is necessary and sufficient that the domain to which these criteria are used is such that the Chipman-Moore-Samuelson criterion encompasses completely the Pareto criterion. When interpreted in a standard economic environment, this result is shown to be equivalent to Gorman's requirement of non-crossing between utility possibility frontiers. Received: June 18, 1998; revised version: March 2, 2000     

Does Mill's case for infant industry protection capture Hamilton's and List's arguments for promoting industrial development?

Abstract

Mill's case for infant-industry protection is widely regarded as capturing the arguments by Hamilton and List. This paper argues that they are actually analytically different. While all three were influenced by Smith's Wealth of Nations, Mill took from it something different than the other two. His endorsement passage for protection refers to a standalone industry. Hamilton and List attached significance to the pin-making type of division of labor at the economy-level but they emphasized the development of that division as the activation of backward and forward production linkages, à la Hirschman, with increasing diversification and differentiation of occupations and industries. Mill only considered employing customs duties in his passage, although in some personal correspondence in the 1860s he mentioned a subsidy. Contrary to mainstream misrepresentations, Hamilton and List did not restrict themselves to proposing customs duties, but suggested both trade and non-trade interventions to activate linkages. Mill's formulation focuses attention on very simple learning by doing to establish the standalone industry. Thanks to their conception of the development process, Hamilton and List appreciated the complexity of technology acquisitions and devoted far more attention to that subject. The implications of these differences for future research and policy considerations are briefly discussed.     

评林毅夫的新结构经济学：理论、政策和难点

近年,林毅夫提出了新结构经济学,据说有可能是发展经济学继结构主义和华盛顿共识之后的第三波理论浪潮的重要流派。新结构经济学认为一个经济体的经济结构内生于它的要素禀赋结构,持续的经济发展是由要素禀赋的变化和持续的技术创新推动的。新结构经济学得出了与旧结构经济学不同的理论结论：市场在资源配置中发挥核心作用,把进口替代看做是发展中国家在发展过程中爬升产业阶梯的自然现象;政府发挥积极作用。新结构经济学在财政政策、货币政策、金融发展、外国资本、贸易政策、人类发展方面得出了一些新的政策启示,但是新结构经济学也存在着一些理论难点。     

‘Just one of us’: consumers playing oligopoly in mixed markets

Consumer cooperatives represent a highly successful example of democratic form of enterprises operating in developed countries. They are usually medium to large-scale companies competing with the profit-maximizing firms in the retail sector. This paper describes this situation as a mixed oligopoly in which consumer cooperatives maximize the utility of consumer-members and, in return, refund them with a share of the profits corresponding to the ratio of their individual spending to the cooperative’s total sales. We show that when consumers possess quasi-linear preferences over a bundle of symmetrically differentiated goods, and companies operate using a linear technology, the presence of consumer cooperatives positively affects total industry output, as well as welfare. The effect of cooperatives on welfare proves to be even more significant when goods are either complements or highly differentiated, and when competition is à la Cournot rather than à la Bertrand.     

Reconsidering the Impact of the Environment on Long-run Growth when Pollution Influences Health and Agents have a Finite-lifetime

Using an overlapping generation model à la Blanchard (1985, J Polit Econ 93:223–247) with human capital accumulation, we demonstrate that the influence of the environment on optimal growth in the long-run may be explained by the detrimental effect of pollution on life expectancy. We also show that, in such a case, greener preferences are growth- and welfare-improving in the long-run even if the ability of the agents to learn is independent of pollution and utility is additively separable. Finally, we establish that a minimum environmental policy is required to obtain a sustainable equilibrium in the market economy and that it is possible to implement a win–win environmental policy.     

Fiscal Decentralization and Political Budget Cycles

We analyze a problem à la Rogoff where incumbents can distort fiscal policy to signal their competency, but where fiscal policy can be centralized or decentralized. Our main focus is on how the equilibrium probability that fiscal policy is distorted in any region (the political budget cycle, PBC) differs across fiscal regimes. With centralization, there are generally two effects that change the probability of a PBC. One is the possibility of selective distortion: the incumbent can be reelected with the support of just a majority of regions. The other is a cost diversification effect, which is present unless costs are perfectly correlated across regions. Both these effects work in the same direction, with the general result that the PBC probability is lower under centralization when decentralization also involves PBC. Welfare analysis shows that voters tend to be better off when the PBC probability is lower, so voters prefer centralization when decentralization involves PBC. Our results are robust to a number of changes in the specification of the model.     

Dynamics of the non linear learning curve with spillovers in a differentiated oligopoly: effects on industry structure

We analyze the effects on industry structure of non strategic learning-by-doing with spillovers in a differentiated oligopoly à la Bertrand. The dynamics is driven by a non linear learning curve. Conditions for shakeouts are analyzed, focusing on the key factors affecting them. Policy interventions to limit shakeouts are suggested.      

Economics is not always performative: some limits for performativity

The phenomenon of performativity has recently sparked debates about the status of the economic discourse. This paper aims to discuss the subjectivist idea that if economics ‘performs’ (shapes) social reality, rather than merely reflects it, then every theory can be considered ‘true.’ My main goal is to point out three limits of performativity. First, not all theories can be performative since some do not produce empirical landmarks for agents. Second, social institutions restrict performativity. Third, I emphasize the necessity that a theory to be self-fulfilling. This article is a prelude to a new kind of performative studies based on an original definition: a theory performs the world if it implies a behavioral regularity which leads to a general coordination between agents. That is to say, if it becomes a convention à la David Lewis.