Primary Product Dependence - 2021 Revision Update

In this video we explore the important concept of primary product dependence as a barrier to inclusive and sustainable growth and development.

We also revise the Prebisch-Singer Hypothesis and the Dutch Disease Effect.

What is primary product dependency?

Typically, countries at an earlier stage of development tend to export a narrower range of products. Many developing countries continue to have high dependence on extracting & then exporting primary commodities.

What is export-commodity dependent?

A country is export-commodity-dependent when more than 60 per cent of its total merchandise exports are composed of primary commodities.

According to the United Nations (2019)

• Two out of five commodity-dependent countries are located in sub-Saharan Africa
• Nine out of ten sub-Saharan African countries are commodity- dependent
• Only 13 per cent of developed countries are commodity-dependent, compared with almost two thirds (64 per cent) of developing and transition economies

What is the Prebisch-Singer Hypothesis?

The Prebisch-Singer Hypothesis (PSH) suggests that, over the long run, real prices of primary commodities such as coffee and cocoa decline relative to prices of manufactured goods such as cars and washing machines.

What is the Dutch Disease?

Dutch Disease refers to the adverse impact of a sudden discovery of natural resources on the national economy via the appreciation of the real exchange rate and the subsequent worsening of export competitiveness.