{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Criticisms structuralists such as singer and prebisch

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: economic development in “backward” areas begins with resource booms Therefore, resource abundance should help not harm economies: Staple- producers face capital shortages and labor abundance Exporting commodities and attracting foreign investment to do this would correct imbalances in factors of production Governments would also be able to collect revenues. Criticisms: “structuralists” such as Singer and Prebisch = decline in terms of trade would widen wealth gap between rich and poor. Primary products were subject to excessive price fluctuations Volatility in market Resource sector unlikely to promote growth if MNCs were able to repatriate profits instead of investing If the costs of what it exports vs. the costs of the imports goes up, terms of trade goes up, if reverse, ToT goes down (ToT = robust indicator of growth especially in developing countries) Measure of terms of trade: ToT = Pxt/pmt CHECK SLIDES: The costs of resource dependence: Sachs and Warner ! show evidence that resource- rich countries underperform historically Evidence: Regressions show resource- abundance is associated with slower growth Even when controlling for geography, evidence shows that there is a resource “curse” Why? Resource sector drives out lots of other things, mainly manufactured tradeable goods. Price effects: prices are very volatile and if that volatility affects your economy, those countries tend to have less savings, etc. ! makes growth volatile Resource...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online