Authors
Angus Deaton, Guy Laroque
Publication date
2003/8/1
Journal
Journal of Development Economics
Volume
71
Issue
2
Pages
289-310
Publisher
North-Holland
Description
We develop an idea from Arthur Lewis' paper on unlimited supplies of labor to model the long-run behavior of the prices of primary commodity produced by poor countries. Commodity supply is assumed infinitely elastic in the long run, and the rate of growth of supply responds to the excess of the current price over the long-run supply price. Demand is linked to the level of world income and to the price of the commodity, so that price is stationary around its supply price, and commodity supply and world income are cointegrated. The model is fitted to long-run historical data.
Total citations
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Scholar articles
A Deaton, G Laroque - Journal of Development Economics, 2003