In international trade theory, what does the 'Prebisch-Singer Thesis' postulate regarding the terms of trade for developing countries exporting primary commodities?

💡 Solution & Explanation

The Prebisch-Singer thesis argues that over the long term, the prices of primary commodities exported by developing nations decline relative to the manufactured goods they import, leading to deteriorating terms of trade. This structural disadvantage stems from low income-elasticity of demand for raw materials and technological substitution. Other choices assume positive or neutral long-term trends that contradict historical commodity market data. The thesis heavily influenced import-substitution industrialization policies.