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- Title
Effect of Growth on the Terms of Trade: Some Earlier Views.
- Authors
Bloomfield, Arthur I.
- Abstract
This article focuses on the contributions of technological change on terms of trade. Classical analysis of the effects of technical change on trade begins and very nearly ends with J. S. Mill's analysis of the effects of improvements in the methods of production on the terms of trade. Mill's analysis, first involved the case of a technical improvement in a country creating a new export product which foreigners were assumed to substitute for a commodity that they had previously been producing at home. The increased foreign demand, according to Mill, would necessarily turn the terms of trade in favor of the improving country. Foreigners would benefit from the new product but would pay more for their other imports from that country. In the case of an improvement lowering the cost of an existing export product, however, Mill argued that the terms of trade would turn against the improving country, and in a proportion greater or less than that of the cost reduction, depending on whether the foreign elasticity of demand for the cheapened product was less or greater than unity.
- Subjects
TERMS of trade; COMMERCIAL policy; INTERNATIONAL trade; INTERNATIONAL competition; MILL, John Stuart, 1806-1873; INDUSTRIAL costs
- Publication
Economica, 1984, Vol 51, Issue 202, p187
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2554210