Staple Theory notes - Staple Theory Pre-modern based on...

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Staple Theory Pre-modern- based on comparative advantage found in new areas. Aka, the new world, tobacco production by colonists. Short term volatility characterizes a staple economy Fundamental assumption if staple theory is that staple exports are the leading sector of the economy and set the pace for economic growth. Staples are resource intensive exports, to analyze their effect on the economy you must look at” Impact of export activity on domestic economy and society Important determinant is technology of that industry/ the production function. Diversification around the export base: Increased demand for exports leads to more investment and a rise in income. This fact leads me to believe that NIE’s must pursue a sequence of staples in order to continue catching up. Inducement of domestic investment resulting from increased activity in export sector. Staple theory becomes a theory of capital formation. 1)Backward linkage- measure of inducement to in invest in home-production of
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