Technical Progress and the North–South Terms of Trade

Prabirjit Sarkar ()

Review of Development Economics, 2001, vol. 5, issue 3, 433-443

Abstract: In a classical world where prices of both northern manufactures and southern raw materials are determined by market demand and supply, technical progress in one region leads to a terms‐of‐trade improvement of the other region irrespective of whether technical progress is labor‐saving or raw‐material saving. But in a neo‐Kaleckian framework characterized by surplus capacity, and an effective demand problem in the North and a capacity constraint in the South, the terms of trade would turn against the South even if the North experienced a higher rate of technical progress than that of the South.

Date: 2001
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