Abstract
PurposeThis study aims to offer a critique of the theory of the deterioration in terms of trade, developed by Raúl Prebisch and Hans Singer.Design/methodology/approachAs an example of the theory’s shortcomings, the case of Argentina’s import substitution model is analyzed.FindingsThis study demonstrates how a misunderstanding of the influence of price variability in international trade may lead to the mistaken conclusion that protectionist measures must be enforced to achieve growth and prosperity.Originality/valueThis is the first study that criticizes the Prebisch-Singer theory of the deterioration in the terms of trade from an Austrian economics.
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