A model of commodity prices after Sir Arthur Lewis

Angus Deaton and Guy Laroque

No 201, Working Papers from Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies.

Abstract: We develop an idea from Arthur Lewis' paper on unlimited supplies of labor to model the long run behavior of the prices of primary commodity produced by poor countries. Commodity supply is assumed infinitely elastic in the long run, and the rate of growth of supply responds to the excess of the current price over the long run supply price. Demand is linked to the level of world income and to the price of the commodity, so that price is stationary around its supply price, and commodity supply and world income are cointegrated. The model is fitted to long-run historical data.

Keywords: Commodity prices; Sir Arthur Lewis; World income; Cointegration (search for similar items in EconPapers)
JEL-codes: E3 F1 O1 (search for similar items in EconPapers)
Date: 2002-06
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Citations: View citations in EconPapers (1)

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Journal Article: A model of commodity prices after Sir Arthur Lewis (2003)
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