Some estimates of Prebisch and Singer effects on the terms of trade between primary producers and manufacturers

Abstract

Movements in the prices of primary products and manufactured goods are analyzed using a model based on the seminal contributions of Raul Prebisch and Hans Singer. Estimates are obtained from a system of equations using post-WWII data on prices, wages and manufacturing mark-ups, with the results providing evidence of the negative effects on the terms of trade of primary producers suggested by both Prebisch and Singer. These effects more than offset positive effects arising from diminishing returns in primary production, thereby providing an explanation for the negative net trend in the terms of trade of primary producers in the postwar period.