Inter-Sectoral Terms of Trade and Investible Surplus

Mohsen Fardmanesh ()
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Mohsen Fardmanesh: Temple University

No 1060, Working Papers from Economic Growth Center, Yale University

Abstract: This paper studies the validity of the Preobrazhensky’s First Proposition, P1, for the centrally planned Poland during the period of 1960-1987 by testing whether the state increased its internal accumulation, investible surplus, by reducing the inter-sectoral terms of trade between agriculture and industry. It uses an alternative bivariate approach with pair-wise cointegration and Granger causality analysis. While finding some support for P1 in Poland, it reveals that the existing multivariate empirical approach derived from the Sah-Stiglitz’s market-based theoretical model of the ‘price scissors’ problem can misrepresent not only the validity of P1 in a centrally planned economy but also the impact of the intrinsic determinants of the state’s investible surplus such as the production capacities in agriculture and industry.

Keywords: Price Scissors; Internal Accumulation; Investible Surplus; Inter-sectoral Terms of Trade; Central Planning; Poland (search for similar items in EconPapers)
JEL-codes: O2 P2 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-09
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Citations: View citations in EconPapers (1)

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