Price scissors and the structure of the economy
Raaj Kumar Sah and Joseph E. Stiglitz
Quarterly Journal of Economics, Volume 102, Number 1, February 1987, pages 109-134.
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This paper undertakes three sets of tasks: (i) it analyzes positive and normative aspects of price scissors (the domestic terms of trade between agriculture and industry) within nonsocialist as well as socialist LDCs. The critical role of the economy's institutional features (e.g., external trade environment, wage and income determination, and wage-productivity effects) is emphasized. Certain aspects of the Soviet Industrialization Debate and subsequent collectivization are interpreted. (ii) It develops simple rules to delineate who gains and who loses (within agriculture) from changes in terms of trade. (iii) It presents powerful (and informationally parsimonious) rules for Pareto-improving price reforms for cash crops and agricultural inputs.
Previous working versions:
“Price scissors and the structure of the economy.” Yale University, Department of Economics. Economic Growth Center, Center discussion paper 478. May 1985.