Profit, rent and the terms of trade

Margaret Andrews

Journal of Development Economics, 1985, vol. 17, issue 1, 141-149

Abstract: In response to my article in this issue, Gibson and McLeod argue that, by ignoring a viability condition, I incorrectly conclude that a positive profit rate is not necessary for the perverse profit response. Furthermore, they argue that a positive profit rate, not the technology parameters, is the profoundly important social determinant of their original result. It is shown here that the imposition of the viability condition does not contradict my conclusion. The relevance ascribed by Gibson and McLeod to their positive profit rate condition is disputed and an unexpected relationship between rural wages and profit rates is uncovered. Technology is again shown to be the modulator of the distributional struggle. Finally, the empirical evidence presented by Gibson and McLeod in support of a fixed-profit equilibrium trap for U.S. agriculture is examined and its relevance questioned.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:17:y:1985:i:1:p:141-149

DOI: 10.1016/0304-3878(85)90027-6

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